Safety Deposit Current Accounts Bill [HL]

The Earl of Caithness: My Lords, I beg to move that this Bill be now read a second time.
	This is a small, simple Bill. On the one hand, it is designed to promote choice for the consumer. On the other, it is a modest attempt to start winding in a banking system that is becoming increasingly unsustainable. It is in response to the recent Northern Rock crisis, which represents the first run on a UK high street bank in the post-war era, and the systemic failure manifest in the worldwide banking system. Of course, Northern Rock is not the first bank since the war to go wrong because of incompetent management; there were the National Mortgage Bank, Barings and Johnson Matthey, to name but three. But no reassessment was made of the fundamentals after those crises.
	I want to take a moment to set out the background. The present banking crisis was inevitable. The only question was when it would happen. Since 1971, there has been a massive change in the way in which the banking and monetary system operates, but there has been no discussion in Parliament, or a vote, as to whether the system is right and whom it is benefiting. The current system was designed by bankers for the use of bankers and for the benefit of bankers. One should not complain that they have done well out of it, but what about the depositor and the taxpayer? From their point of view, all Governments are at fault because they have not looked at this whole matter with the critical eye that it deserves. As the rest of us became more regulated, the banks were given a light touch—so light as to be almost insignificant.
	In 1979, the total UK money supply was just under £31 billion. When this Government took power, it was £665 billion. Today, it is well over double that, and on the Bank of England's calculation it is £1,700 billion. These figures show about a 5,400 per cent increase over 30 years and the graph is getting steeper. It seems to be on an exponential curve which promises a lot more problems ahead.
	It is most appropriate that the debate following this Bill in the name of the most reverend Primate the Archbishop of Canterbury is calling attention to indebtedness and credit. A consequence of the banking and monetary policy is that we live in a debt-based society which most people are beginning to see is dangerous and wrong. Yet the answer to the present crisis is to reduce interest rates and try to reduce the cost of mortgages. But what does that do? It merely encourages us to keep our existing borrowing and extend it. We shall not solve that problem unless we tackle its roots.
	Since 1971, the proportion of notes and coins, which is the Government's responsibility, has fallen from 14 per cent to 2.5 per cent, so the Government are increasingly irrelevant and marginalised. It is the banks, building societies and commercial lenders which have been responsible for this situation and now greed, incompetence in many cases, and lack of accountability have all become apparent. Even the Institute of International Finance has admitted that banks have been guilty of major points of weakness in business practice. No wonder there is a lack of confidence in the credit markets.
	Although it was good to hear the Minister say on Monday, when he repeated the Statement on financial stability—although "financial instability" might have been a more appropriate description—that the Financial Stability Forum in Washington had agreed a range of actions, the genie is out of bottle and it is too little too late. Sadly, that body does not seem to have addressed itself to the position of the individual, and all of us, whether we like it or not, have to work with and through banks. In that, we have no choice, which takes me on to the Bill.
	Most people do not know that, as the law stands, as soon as they put their money into their current or cheque accounts it is no longer their own. It becomes the property of the bank and they become unsecured creditors, ranking behind secured creditors in the event of failure. Far from putting their money into safe storage, they are actually lending it to the bank, and the bank is free to use it and invest it as it pleases within the rules of the FSA. The Minister, with his well known scepticism of the estate agency market, will surely agree with me that it makes a mockery of the need for solicitors and estate agents to have to account for clients' funds in the way that they do, only for the bank to muddle up all that money, together with others, and put it at possibly greater risk.
	As we have seen with Northern Rock and with the entire world banking system, bank managers are not necessarily prudent or wise in their investment strategies. Nor has the FSA proven capable of proper supervision of banking business plans, investment strategies or risk management. When Northern Rock refused to allow its depositors to withdraw their money, the bank acted correctly and responsibly. The law states that its first duty is to secured creditors and not to depositors.
	At present, if we wish to pay our bills easily and conveniently, we need a current or cheque account at a bank or building society. There is no other choice. Yet in order to use a bank or building society current or cheque account, we must put our money at risk by becoming an unsecured creditor of an institution too many of which have proven to lack wisdom, prudence or safe investment practices. That is why there is such a hue and cry for Governments to make the banking industry safer. A new approach is needed, which is why I am putting forward this legislation. It offers depositors the service and protection that they believe they have, but do not, and to which they should be entitled.
	The Bill offers depositors the choice between a present at-risk current account and a safety deposit current account in which the funds deposited remain the property of the depositor and which guarantees to depositors both secure storage and secure distribution. With safety deposit accounts, banks will be required to maintain for each account the precise amount on deposit in the form of cash in their vaults. That cash must be segregated from the banks' other cash and be available to depositors on demand. Banks will not be allowed to use funds in safety deposit accounts for any purpose whatever, other than according to the instructions of the depositors. Therefore, a bank will not be able to put depositors' money at risk in order to earn money for itself. That is the essence of Clause 1.
	Without the ability to try to earn money with these deposits, banks will have to make a reasonable charge for both storage and distribution. This is covered by Clause 2. These accounts will be more expensive than existing current accounts, but depositors will in future be given a choice: safety at higher cost or risk at lower cost. These accounts will need proper monitoring. Although the FSA has not covered itself in glory to date, Clause 3 requires it to audit banks continually to ensure that the cash held physically by each bank in its vaults is both equal to the amount on deposit and segregated from the bank's other funds.
	From the taxpayer's point of view, these safety deposit accounts offer a considerable saving. Northern Rock alone has already cost the taxpayer some £1,800 each. My noble friend Lady Noakes reminded us on Monday that it could be considerably more. That was before an additional £50 billion was made available to banks by the Bank of England on Monday in its dramatic U-turn. The previous position argued by the governor was that banks should pay for their mistakes. Now the commercial banks' prayer, "Forgive us our sins", has been answered. The clear perception now is that the Government will ride to the rescue of those who have managed a bank badly or incompetently. Let us not forget that it is the taxpayer who has to guarantee these funds and thus remains even more at risk to the entire banking system.
	With a more sensible banking option having been established by this Bill, it is only right that the taxpayer is better protected than at the moment. Thus, under Clause 4, safety deposit accounts will be the only accounts that public funds will be allowed to insure or guarantee. Surely it is right that taxpayers will no longer be required to bail out the irresponsible and greedy behaviour of some bankers, whom the Government treat differently from normal companies. The FSA will be limited to guarantee precisely what it audits regularly and ensures is physically present in the vaults of each bank. For this guarantee, there should be little if any risk at all. The consumer will be offered a choice of current accounts and the right to continue to own their own money when stored for them. I commend the Bill to the House.
	Moved, That the Bill be now read a second time.—(The Earl of Caithness.)

Earl Ferrers: My Lords, I had intended to put my name down for the debate, but was told that the speakers list had closed at 6 pm. So I wondered whether I might say just half a word in the gap, although I had not expected the gap to be after the first speaker.
	I congratulate my noble friend on thinking up this idea. He has explained the purpose of his Bill very well. Fundamentally, it is that if you put money on deposit, it should be in the form of cash; it should remain there; it should not be the property of the bank; and if you ever want to take that cash out, you can get it out, and the bank cannot squander it on other things. That seems fine.
	My only concern relates to Clause 1(5), which states:
	"Money held in a safety deposit current account must be ... kept in the form of cash".
	I remember an elderly lady who had about £40,000 in a deposit account. She went along to the bank and said, "Can I please have my money out?" The bank said, "Yes, we will give you a cheque". She said, "I don't want a cheque, I want the money". "You mean you want all the £40,000?" She said, "Yes". The bank said, "Well, will you come back after lunch, because we'll have to count it all out?" So she came back after lunch and there were great piles of notes all over the place. She said, "Oh, that's fine. I just wanted to make sure it was still there, so will you now put it back again?" I fear that this is the kind of thing that might happen with my noble friend's Bill, so I merely offer that tale as a caution.

Lord Razzall: My Lords, we should all be grateful to the noble Earl, let alone his noble friend for his intervention, for raising what is clearly a significant issue in the current climate. The debate is particularly opportune, because, as he indicated, it is being taken on the same day as the debate which follows, on the Motion of the most reverend Primate.
	I think that it will be common ground in your Lordships' House that the recent events involving Northern Rock, let alone some of the problems that the major clearers have got themselves into, indicate, or perhaps a lift of a veil on, banking problems of which most of us had been only dimly aware until the unhappy events of the past few months. It has been said to me by a senior banker that what the public have never appreciated is that, for most of the past 150 years, almost every bank has been technically insolvent, because the practice of borrowing to a large extent short and lending to a considerable extent long has been supported by the ability of banks to borrow significantly in the inter-bank lending market. If that starts to be difficult, banks by any rational test of solvency become insolvent because they have difficulty knowing how they are going to meet their liabilities. That banking practice, which in the case of many of the well established banks has been based on long-standing accepted ratios of short-term to long-term lending, and endorsed, or to some extent ignored, by the regulators, has existed for a long time. Only in the past few months have we come to realise that the banks were perhaps not as prudent as they might have been. In raising this topic, the noble Earl has touched on something that is fundamental in the operation of our financial system.
	Having said that, we on these Benches we have some difficulties with the noble Earl's solution. In practical terms, I assume that he is suggesting that the banks should provide a safety deposit box for people's money and assets, give them a key and enable them to turn up at the bank whenever they want to get their money back—or, in the case of the friend of the noble Earl, Lord Ferrers, have their money counted and put back in the safety deposit box. In reality, that is the effect of this Bill. I suppose that in many other countries of the world where there is concern about banking stability, people buy a safety deposit box to keep their money in and put it under their bed. Indeed, I somewhat frivolously wonder whether it would be cheaper for members of the public, rather than taking up the opportunity presented by the Bill, to get themselves a safety deposit box and pay for a good burglar alarm company to protect their property while putting the cash under the bed.
	In a slightly frivolous sense, I worry that the Bill would not have the real effect on the customer that the noble Earl clearly believes that it would have. In a wider sense, however—and this is where this short Bill would have a volcanic effect—what the noble Earl is really suggesting is that the whole basis on which our banking system has been based for 500 years should be overturned. He is saying that banks cannot take our money and lend it on in a prudent manner but that they should leave it in our ownership, not pay us interest on it, pay us a small fee and allow us to have our money back whenever we want. That is fine—but I dare to suggest that, were this to be implemented, commercial life as we know it and have known it for 500 years would actually come to an end.

Baroness Noakes: My Lords, it is a pleasure to respond to this Bill today. My noble friend Lord Caithness is to be congratulated on developing a Bill which makes us challenge basic notions of what our banking system is about.
	When I first saw my noble friend's Bill, I was somewhat perplexed by it, but he took pity on me and gave me some recess reading in the form of a book by Mr John Tomlinson entitled Honest Money—A Challenge to Banking. The book was written in the early 1990s, when there were concerns about recession and unemployment. The book laid the blame for this at the door of bankers and their continuous search for new lending opportunities, which created a spiral of inflation. The solution in the book was to stop the lending merry-go-round, replace debt with equity and thereby largely fix the stock of money supply, which would stabilise the system and eliminate inflation.
	That is a rather extreme version of the scenario on banking that my noble friend has opened up for debate. I do not think that the banking system is quite the ogre that the book portrays. I think that banks have had a net positive impact on wealth creation by facilitating investment and growth in the global economy. On the other hand, I do not believe that banks are perfect. The reason why we have banking regulation throughout the world is to ensure that banks do not create economic mayhem. We have seen in the past nine months or so how much economic harm can be caused by a banking system which kept liabilities off its balance sheet and which created ever-more complex borrowing vehicles, disconnected from the underlying transactions. Mortgage securitisation sounded and looked simple until the music stopped and no one knew where the sub-prime losses would end up. The consequential failure of confidence in the international financial markets is still causing many problems in the world, including the UK.
	I do not think that we should lay at the doors of the banks all the blame for the asset price bubble that is now bursting, but they clearly have some measure of responsibility. Banks respond to demand within the regulatory constraints placed on them. Those constraints have recently been updated after much consideration by the Basel committee, but it is already clear that the Basel 2 rules do not deal sufficiently with liquidity or off-balance sheet transactions—and already they need to be revisited.
	We believe that the capital requirements for banks within the credit cycle should also be revisited, so that a monetary element of the capital adequacy calculations could be used to control credit in times of boom and expand it in times of contraction. In this way we could harness the energy of the credit cycle in a positive way and mitigate boom and bust. The Prime Minister used to boast that he had abolished boom and bust, but we now know that he knew only how to ride the crest of the wave in boom times and knew nothing about preparing the economy for a downturn. We are currently paying the price for that. That requires us to have some new thinking.
	That brings me to my noble friend's Bill, which genuinely does represent new thinking. The Bill recognises that the Brown-Darling guarantee of Northern Rock's liabilities was an undesirable outcome of the bust phase and offers a way for the Government to escape from their guarantee to the banking system. However much the Government like to deny it, the practical impact of last September's guarantees of Northern Rock is that they will be expected to stand behind retail deposits as a minimum in future. The Financial Services Compensation Scheme did not deal with the Northern Rock crisis and the Government had to go way beyond guaranteeing retail depositors as they progressed through their messy journey towards privatisation, de facto guaranteeing the whole of the liabilities of Northern Rock.
	The Bill's elegant solution is a new class of bank account, a safety deposit current account, which will always be preserved at the cash value at which it was created. My noble friend's solution does not involve putting cash in safety deposit boxes, as the noble Lord, Lord Razzall, suggested. I am sure that my noble friend was mindful of the experience of the Central Bank of India, where an invasion of termites attacked safety deposit boxes in which Indians were accustomed to putting large amounts of bank notes. When customers turned up, the termites had had 'em.
	The Bill proposes a new account which will be backed by an equivalent amount of cash, audited and inspected by the FSA. Owners of such accounts will get no interest because the bank cannot use the money to work within its balance sheet. They may incur fees and they will almost certainly lose value in real terms, but they will at least be able to sleep easy at night knowing that the nominal monetary value will remain safe. On the other hand, those who have an appetite for risk would be able to deposit money with banks on any other terms that banks offer and can earn a return on that money, but Clause 4 of the Bill says that these accounts will not be guaranteed by any authority. I am not sure that the use of the terms "any authority" and "public money" are unambiguous, and my noble friend might consider tightening the wording if this Bill proceeds to Committee.
	I am not aware of any clamour among the public for safety deposit current accounts. However, given the Brown-Darling guarantee, there is unlikely to be much call for an unremunerated bank facility, if the Government already underwrite retail deposits. The bigger question is whether we should facilitate this by making it absolutely clear that public money will not bail out any other bank liabilities. I cannot myself see a banking industry which did not encourage return-seeking deposits. One problem facing our economy is the slump in the savings ratio and the fact that too few people have savings as opposed to debt. We need to encourage saving and, if that is to make a meaningful contribution to retirement incomes, the money has to seek a return. Of course, most of that investment will not be in bank deposit accounts but it would seem odd to steer people away from seeking a return when depositing cash as opposed to investing in other assets.
	That of course means that I see the need for a robust compensation scheme for retail deposits. We await the outcome of the Government's review of the existing scheme. The Minister might like to talk about that today, and, in particular, whether they can come up with a scheme which deals with the fact that some of today's banks are so large that if they did fail they would overwhelm any industry-funded scheme. But, given the systemic risks of such a failure, it seems very difficult to do away with public support in all circumstances. I have doubts that the Government will be able to produce a scheme that extricates them from de facto underwriting retail deposits.
	My noble friend has given us a lot to think about. I look forward to the Minister's response and, indeed, to later stages of the Bill if my noble friend chooses to take it forward.

Lord Davies of Oldham: My Lords, I welcome the opportunity to debate the issues the Bill raises. Lest noble Lords thought that as a Private Member's Bill it represented not much more than the extrication of a small pin from the ground, let me say that the pin contained in the Bill is more akin to the one in a hand grenade, as a rather loud explosion will go off if in fact the Bill ever becomes law.
	I must say that I have a great deal of sympathy with the speech of the noble Lord, Lord Razzall, who indicated the implications of the Bill. I am not sure that I can follow the line that this is a fundamental onslaught on the concept of banking since the 14th or 15th century, but there are aspects of it that are not far off. That is why the Government look at the Bill not only with interest but with a certain anxiety about its implications, particularly as, as the noble Baroness has taken the appropriate opportunity to say, we are concerned about how we best support confidence in our banking system. In a few moments I will relate the Government's proposals in respect of this.
	Inevitably, I suppose, we were bound to go over a certain amount of old ground, and I did not think that I could face this debate without some reference to Northern Rock and perhaps even to the Statement made earlier this week. Let me reiterate again—and I cannot say this much more strongly than I have sought to do in the past—Northern Rock was not bailed out. Northern Rock is in public ownership with the shareholders having lost very substantially. The shareholders are possibly bringing a case about the level of the shares and the compensation to which they are entitled. But, let us make no bones about it, there are losers in Northern Rock as far as concerns the shareholders. In addition, as was predicted—and this point does not get quite the same level of currency in the House in contributions from the other side—announcements are being made that Northern Rock will lose substantial numbers of staff as its business contracts. So several hundreds of people are going to pay the price of the failure of Northern Rock in circumstances where they may have the most marginal, if any, responsibility for the debacle which occurred.
	Likewise I reiterate, as I sought to emphasise on Monday, the Bank of England is not bailing out banks; it is increasing the degree of liquidity in circumstances where we all recognise that limited liquidity is producing great strains on the financial system and would feed through to the real economy. But the whole concept underpinning Monday's Statement is that the banks locate with the Bank of England securities that not only are appropriate and level to the resources made available to them but are of greater value than the money that becomes available to them. The idea that it is some kind of bail-out is a complete misconception.
	The noble Lord, Lord Razzall, was concerned to emphasise that banks play a critical role in the economy and that we should take care about any possible onslaught on the principles on which they work. The noble Earl, Lord Caithness, sought to bring to the House's attention the fact that I had taken an interest in the past in the other place with legislation I introduced concerned with client money and estate agents holding money for third parties. It is a very important consideration. I was very glad that although I could not, as a Back-Bencher, get that legislation through, it eventually became government legislation a few years afterwards. This concept is different. It is not about a third party's money but the individual going to the bank and the bank having a special arrangement for the deposit which the individual makes.
	Banks use resources made available to them through accounts for investment. They distribute capital across the economy and allow financial needs to be managed over time. Banks play a critical role. That is why we are all concerned. I am not talking just about legislators; every one of our fellow citizens is inevitably concerned when the banking system gets into the level of difficulty that has obtained over the past few months.
	The Bill seeks to strengthen protection for the bank's customers in one particular area, namely deposits. The proposal is that the bank should be required to provide a safe custody service for the money. That is entirely different from how banks operate when we deposit money or open current accounts with them. The new account would mean that the banks are not borrowing from the customers at all. They would hold the customer's money on his or her behalf, and could not lend it to other customers. That is a massive inhibition on the centuries-old role of banks and the long period of time in which building societies have operated. If there were a high take-up of the proposed safety deposit current accounts by consumers, there would certainly be a significant impact on the cost of borrowing and therefore on the real economy.
	Secondly, the new account which the noble Earl presents has the great virtue of absolute protection, but it is not a savings vehicle. Money has to be held in cash and will remain the property of the customer. Everyone will be able to follow the illustration of the noble Earl, Lord Ferrers, of the individual who goes along and demands there and then to see their money, and everyone of course can take out their money there and then, even though it is a deposit account. That would of course affect the flexibility with which banks operate with regard to resources, and the money would not grow. It would freeze at its current position. Although the House will recognise the Government's significant success over the past decade in managing and restraining inflation, inflation still erodes savings over time and this deposit account would be worthless the longer it was held in the bank.
	The other aspect is that there is no reason why a bank should not offer this facility here and now. We do not need legislation to allow banks to provide a deposit facility. In fact banks offer safety deposit boxes. It is true that they charge for them, but that is the agreement between the customer and the bank. That guarantees what is in the box. The concept of the safety deposit box is that the bank does not know what is in it. It is merely a secure place in which things are lodged. I do not think that we need to prescribe anything in legislation in relation to that.
	As the noble Baroness, Lady Noakes, emphasised, we need to take urgent steps to strengthen the banking system and to restore confidence in the light of developments over recent months. I am not sure that this Bill will make any contribution to that. However, as the noble Baroness indicated, it is important that the Government think very seriously indeed about, and produce proposals to deal with, the situation with which we are confronted.
	In October last year, the Chancellor announced a review of the existing supervisory regime, including complex areas such as the legal framework for dealing with banks facing difficulties. As a result, a consultation document was published in January 2008, Financial Stability and Depositor Protection: Strengthening the Framework. We allowed time for consultation on this framework document, which ended on Wednesday. That does not mean to say that the noble Earl, Lord Caithness, has not contributed something to that. I am not suggesting for one moment that he is out of time. The Government are ever open to representations from all quarters but particularly from parliamentarians and the noble Earl, Lord Caithness, is timely in his representation. But we need something more significant than this Bill. We intend to bring forward legislation later this year once we have evaluated the consultation and reached our conclusions. The document envisages action by the Financial Services Authority to make rule changes and by the Bank of England to address the key objectives of strengthening the financial system, reducing the likelihood of banks failing, reducing the impact of failing banks, designing effective compensation arrangements in which customers have confidence, strengthening the role of the Bank of England and improving co-ordination between the authorities charged with the supervision of the financial system. This work will bear fruit in a government Bill, which will come before this House not long from now, and in a range of other measures to restore confidence in the banking system and improve protection for customers. We have all learnt very sharp and important lessons from developments over the past few months. I emphasise that the Government are responsible for the British banking system but the House will recognise that the difficulties we face are reflected internationally across all the advanced economies and even beyond.
	As I said at the beginning, this Bill looks modest in intent, but, if implemented, its impact would be explosive. I welcome the opportunity to debate it and I very much enjoyed the noble Earl's opening speech but I am not sure that the Government will feel the greatest joy if this measure finally arrives on the statute book.

The Earl of Caithness: My Lords, I am grateful to all who have spoken. It is clear that the banking system has been shrouded in mystery for far too long and that it has some very serious structural faults which need addressing. Like the rest of the House, I thoroughly enjoyed what my noble friend Lord Ferrers said about the woman going into Barclays Bank. All I can say to my noble friend is that had she gone into Northern Rock in the middle of the crisis, it would have turned round to her and said, "No, you can't have your £40,000 back because you're an unsecured creditor". That is the point of this Bill. Indeed, that is what Northern Rock did do to people who tried to withdraw their money.
	The noble Lord, Lord Razzall, rightly said that the current situation is beginning to lift the veil on the secrecy of banking and many of the problems. I am grateful to him for saying that the Bill addresses a fundamental point. It tries to do exactly that, but it is only a small point. However, I take issue with his remark that I am trying to change the banking system as it has existed for the last 500 or so years. I disagree because the banking system changed dramatically in 1971 when the link with the gold standard changed. When President Nixon changed that, he changed, either deliberately or inadvertently, the whole way in which the banks operated. I go back to the figures that I mentioned earlier. The money supply in 1971—which is why I referred to that date—was £31 billion, but it has now shot up to £1,700 billion. That would not have happened under the old banking system. So it is really only in the last 30 or 40 years that the banking system has evolved into what we accept and take for granted today, which so many think should not be looked at with a severely critical eye.
	I also take issue with the noble Lord's remark that I am forcing a change in the way that we operate commercially and in how the banks operate. I am not forcing a change; I am merely offering choice to the depositor. If the depositor does not take up the option, that is fine, but at least there will be an option which there is not at the moment.
	I am grateful to my noble friend Lady Noakes for her serious look at this. I say to her what I have just said to the noble Lord, Lord Razzall. She said that there is no clamour from the public for safety deposit accounts, as the Government now seem to be guaranteeing all deposits. I agree that there is no clamour, but the Government should not be guaranteeing all deposits. All I am asking is for the option to be offered and for the depositor to have choice.
	I congratulate the Minister. There is no finer exponent of the straight dead bat on the government Front Bench. He is head and shoulders above the rest, whom he makes look like No. 8 big sloggers at the end. He is a fine talent. However, I disagree with him that it is the role of the banks to lend money. That was not their original role—which was to store and distribute money safely at the depositors' request. They became lenders later and we have all got used to that. My little Bill tries to put back a little bit of the banks' original role. I agree with him that the safety deposit account is not a savings account; it was not supposed to be. If somebody wants to save, there are other ways of doing so. I encourage and welcome the idea that we should increase our savings. All I am trying to do is give safety to unsecured creditors.
	The Minister also said that there is no reason why the banks should not offer these accounts now. Of course, there is not in theory but, as he so rightly said in the first half of his speech, it is not in their interest to do so. It is in their interest to lend money, not to store it safely. I am grateful for what he said about the banking problems that we all face and about the consultation that has just taken place. He also said that something more substantial than this Bill is needed. I agree with him totally. A whole new approach to banking is needed if we are to retain confidence in the banking system and stop the very worrying trend of the increase in the money supply which the most reverend Primate the Archbishop of Canterbury will discuss in a moment in relation to debt. Debt is the huge concern behind all this and, given the uncontrolled money supply that we have had for the last 30 to 40 years, our children and grandchildren will face a potentially horrendous situation. I am grateful to all those who took part in the debate.
	On Question, Bill read a second time, and committed to a Committee of the Whole House.

Families: Economic Inequality

The Archbishop of Canterbury: rose to call attention to the impact on the family of economic inequality, credit and indebtedness; and to move for Papers.
	My Lords, I declare an interest as president of the Children's Society, the Church Urban Fund and the Family Welfare Association and as vice-president of Barnardo's. Thanks to the discussions so ably initiated by the noble Earl, your Lordships will need no reminding from me of the present crisis around credit in our economy and in the global economy. Daily headlines highlight the effects of the credit crunch on average incomes and home prices. What they do not always underline is the disproportionate effects on those in our society who are already most disadvantaged, particularly vulnerable families.
	Even before the current crisis, the situation was disturbing enough. The estimate that almost one-third of children in the United Kingdom are living in poverty is a statistic that needs to be shouted from the housetops. We can applaud the declared aim of the Government, stated in 1999, to halve child poverty by 2010, but we must recognise that this goal is, sadly, unlikely to be attained on present showing. So serious is this prospect that over 45 major NGOs are later this year launching a national campaign called Get Fair, which is aimed at once again galvanising the commitment to end child poverty by 2020, the date which was originally set, and at tackling the negative and unjust image of people living in poverty that prevails in a worryingly large percentage of the population.
	One of the matters that I wish to underline in this debate is that, because of the variety of problems around debt and credit, children in poverty are caught in a particularly toxic version of the poverty trap. Families with children face heavier pressures in regard to basic expenditure, pressures that push their outgoings beyond their weekly income levels. This is not to do with the purchase of luxuries; it is to do with school uniforms, adequate diet and heating in the home, access to routine leisure activities and so on. How much does it cost to travel to the nearest swimming pool? Never mind the extra expectations around Christmas and birthdays.
	A 2007 report commissioned by Barnardo's quoted a mother who was facing a choice in the winter between putting the fire on and using the cooker to prepare a meal. Incidentally, households using pre-payment meters are generally reckoned to be fuel-poor; that is, with over 10 per cent of household income going on fuel. The expense of that system is so much greater than payment of fuel bills by direct debit, which is of course impossible if you have no reliable credit arrangements. The Government's pledge to tackle fuel poverty in the recent Budget is a welcome if overdue recognition of the scale of this problem.
	The results of living in such a trap are long-term. The Children's Society's Good Childhood inquiry, of which I have the honour to be patron, has tabulated evidence of the outcomes of child poverty in adolescence and early adulthood, including a lower likelihood of planning to marry and a belief that health is a matter of luck, both of which are unhappy auguries for the stability and welfare of the next generation. But the more immediate consequence of such situations is that such families are far more likely to resort to borrowing and to what might be called panic borrowing; that is, resorting to whatever means of credit they can discover by word of mouth or by advertisement. If they borrow from doorstep lenders, even relatively reputable companies—there are plenty of others—will impose interest levels whose impact is crippling. The cycle of financial deprivation and anxiety is continued, and the vulnerability of children in such a family situation is intensified.
	It is not surprising that, to use figures extrapolated from a Bank of England report on financial pressures a few years ago and circulated by Church Action on Poverty, households with an income of less than £12,000 per annum have unsecured debts corresponding to an average 36 per cent of that income. The figure for households with over £50,000 income per annum is a little over 12 per cent. Those percentages, which are from a few years ago, have increased dramatically for low-income families, more than doubling for the lowest sector.
	Apart from the bare fact of chronic financial insecurity, the effect in terms of mental health is increasingly serious. There is still a stigma attached to unsecured debt, and being caught in the spiral of indebtedness produces depression and demoralisation, and stress on relationships and on consistent and responsible parenting, with an intensified risk of so many of those things which we currently spend millions of pounds attempting to eradicate, such as teenage pregnancy, underachievement in schools and a lack of motivation in relation to work and self-care. The marriage guidance organisation Relate notes that money worries are one of the primary factors in relationship breakdown, and Christians Against Poverty reports that one in three of its clients has considered suicide before approaching it for help. The impact of debt is enormous in these respects, and we badly need more joined-up thinking that can factor into our response to debt an awareness of costs to the NHS, to education services and to overall productivity.
	Some of your Lordships may not be familiar—indeed I hope that most noble Lords will not be directly familiar—with the world of doorstep credit, in which charges of something in the region of 1,000 per cent are not unknown. The rapidly expanding system of payday lending, where a customer in employment is encouraged to write a cheque, or more often a number of cheques, post-dated to the next payday and is given a cash advance on a certain proportion—perhaps 7 or 8 per cent of the sum, the remainder being treated as a fee—traps the borrower in a spiral of debt as the arrangement is rolled over into a new phase if there are problems with repayment. The initial debt remains, augmented by soaring charges and the mortgaging of all income for long periods ahead. For those without bank accounts in the first place, the pressure of informal credit arrangements is still harsher. It is not surprising that loan companies are reporting massive profits at the moment.
	What needs to be done? The Church of England's campaign, Matter of Life and Debt, which was launched at the beginning of this year, has offered what has been widely recognised as a sane and practical set of guidelines for church members and the wider public about avoiding the worst traps of the present situation. But if we ask what needs to change, there are some obvious proposals to consider. The campaigning association Debt on our Doorstep, led by Church Action on Poverty, is pressing for tighter regulation of the lending market, with a proper investigation of payday lending, which I have just described, and a cap on charges. The consumer credit legislation of 2005 built helpfully on the last review of practice in this area by the DTI and other agencies, but shied away from a ceiling on interest.
	While there is some debate about the effects of capping interest rates in the world of home credit, with some arguing that it could encourage unofficial practice that is even worse than that which now prevails, there is growing agreement that a situation in which charges can legally be as high as they are in the world of doorstep lending is indefensible. It sends the message that borrowing is a business in which you can only be a long-term loser, and so gives a further turn to the despair and low self-esteem that afflicts those caught up in the debt spiral. If the historic sin of usury still has any meaning in the world of smoke and mirrors that our modern credit economy seems to have become, it is surely in this context. At the very least, sharper regulation of the terms and methods of advertising for doorstep credit, which at present is often deliberately unclear about charges and rates of repayment, would bring some checks on what is increasingly and rightly seen as an open scandal.
	As I noted earlier, all this has been true for some years. In a period of economic turndown, it is likely to be far worse, hence the urgency that I underline today. A precarious economic situation does not impact equally on rich and poor; if banks are forced to become more restrictive about where and with whom they operate, it is those whose access to credit is already limited who will feel it most sharply. Within that group, I have argued, it is those who have least control over the circumstances in which they live who will suffer most—children and vulnerable family units without secure income, particularly households in which lone women have the pivotal financial responsibility.
	There is a twofold ethical concern to hold in mind as we consider what should be recommended to meet this challenge. Undoubtedly, Christian morality mandates the defence of the vulnerable. That is central to any society that claims any residual loyalty to our traditional ethic, but Christian morality is also about the equipping of people for the exercise of their human dignity as citizens both of their own societies and of the City of God—St Paul in Second Thessalonians famously commends not only generosity to the poorest, but responsibility on the part of those who can work to do so and to support themselves and their families. Giving to others is part of a process that enables those others to grow in their own dignity and to become givers in their turn. In other words, there is no question of Christian ethics idealising a state of dependency. In the time left to me, I should like to outline two areas in which more could be done to support this positive goal of drawing people out of dependency.
	The first is a matter flagged by many commentators. Young people who have grown up in a context where debt is seen as a routine thing—a perspective which student loans have reinforced—are likely to be very ill prepared indeed to tackle the challenges of family budgeting or even personal budgeting as adults in a climate where economic fluctuations make their reliance on credit a highly risky affair. In other words, there is an urgent case for more support for financial education in schools and FE institutions. Young people are vulnerable to considerable pressure—sometimes, in the recent past, from banks themselves—to embark on risky and costly ventures into borrowing. They need skills in assessing risks, in interpreting borrowing conditions and in factoring into their decisions some better awareness of the uncertainties of the whole system. This needs to start early. The present situation is not good. It is estimated by Credit Action that less than 5 per cent of secondary schools in this country give anything like adequate priority to education in money management as part of their citizenship and PHSE curriculum.
	Furthermore, as the commission chaired by my fellow townsman, the noble Lord, Lord Griffiths of Fforestfach, argued three years ago in a very significant document entitled What Price Credit?, lenders need to take more active responsibility for educating borrowers. The proposal in that commission's report that lenders should routinely "audit" letters and information materials sent out in their name, using the independent resources of a recognised debt advice charity, to ensure that they are,
	"accurate, fair and easy to understand",
	deserves strong support and further development.
	The second area I should like your Lordships to consider is how we support one of the most effective agencies we have in reducing unmanageable debt and developing the skills that help people avoid the worst traps of the credit business. I refer of course to credit unions, and I declare a further interest as a member of the District of Canterbury Credit Union and a former sponsor of a national initiative in Wales which brought together the resources of the Wales Co-operative Centre and the Anglican Church. The work of credit unions is still all too little known in most of the UK, although there are some 172 million members of credit unions worldwide, and more than a quarter of the populations of the United States, Canada and Australia are members. The potential is enormous. It is evident at the simplest level in terms of the financial burden involved in the arranging of a loan: the credit union makes no charges for arranging this, includes loan insurance at no extra cost and has no penalties for early repayment. Even the most reputable home credit company—and there are many others—will be about a third more expensive than a credit union. Increasing numbers of credit unions organise child trust funds and ISAs, and provide special Christmas accounts to help prevent seasonal debt. Some have effective partnerships with local CABs and housing associations and there is some highly imaginative work through schools to promote financial literacy. The Saving Gateway initiative, piloted by the UK Government, which is due for a national launch in 2010, allows for matching contributions to be added to the savings of low-income members of credit unions.
	The encouragement of locally based, entirely trustworthy, user-friendly, educationally sensitive and confidence-building methods of managing debt should be among government's highest priorities in combating the poverty traps that I have described. Many of your Lordships will be aware that a review is under way of legislation on credit unions and other co-operative ventures. It is much to be hoped that fresh legislation will bring increased flexibility by, for example, enabling credit unions to work with corporate members—small family businesses, religious groups active in community work, local co-operative networks and so on—and giving the option to members of paying interest on continuing savings retained in the credit union, rather than receiving a dividend. The latter would have an enormously positive impact on the further development of child trust funds and similar arrangements.
	Furthermore, a broadening of the definition of a common bond area to enable the services of a credit union to be shared across different localities would help these organisations to move more effectively into neighbourhoods where there is no accessible credit. All these new liberties might make the credit union movement in due course as significant a presence in our credit economy as it is elsewhere—bearing in mind that the pressures arising from our current crisis will not be exclusively a matter of concern for the poorest sectors of our society.
	The causes of poverty are many. Setting aside the lazy but persistent mythology that blames all poor people for their poverty, the majority of people in this country who experience deprivation and disadvantage are caught in events beyond their control—and this is manifestly true of children. In recognising the destructive impact of indebtedness upon such people, we may find ourselves asking harder questions about the sustainability of any economy, global or local, that depends disproportionately on endlessly spiralling credit, detached from the realities of material ownership and production. But whatever our views on these large and contentious questions, we should resolve on specific, targeted measures that will protect those currently so ill protected against the tyrannies of doorstep credit and provide the tools needed to reclaim some skill and competence in the management of money and resource, so that the ongoing destructive effects of economic privation on the lives of families can be arrested. I beg to move for Papers.

Lord Anderson of Swansea: My Lords, it is an unexpected privilege to be called to follow the most reverend Primate—I must have friends in high places. It is a privilege also to congratulate him on his exposition and description of the crying need to meet the crushing burden of indebtedness on so many of our poorer families; he did so with a spirit of feet on the ground and head in the air. He has given a real basis for the debate which we face today.
	The most reverend Primate and I go back a long way. We often crossed swords—or was it ploughshares? —on BBC Wales on matters such as the first Gulf War. Now I would do it regarding Sharia. But I have always admired him as a very godly man. His only fault is that he attended the wrong school in Swansea, like the noble Lord, Lord Griffiths of Fforestfach.
	We all recognise the way in which the most reverend Primate can disturb those who need to be disturbed. It is important that he stressed that inequality is not just an economic, material and financial matter—there can be an inequality of aspiration, life chances and education—but money obviously helps, and people are crushed if they are unable to raise their heads above worries about debts. It is very much a part of the prophetic vision of the church to look at the plight of the poorer members of our society, and that becomes increasingly difficult today.
	I make but three points, rather like a sermon. Galbraith wrote of a contemporary culture of contentment in western societies, where the content—roughly two-thirds of us—vote for middle-of-the-road parties, preserve our own privileged lifestyles and yield all too frequently to the temptation to pass by on the other side those who are less fortunate. Hence the need for the church to play the role of Elijah against the Ahabs in government and to rejoice when people such as the most reverend Primate are called "holy troublemakers" in today's society.
	The second point relates to child poverty. I am most grateful to a Christian charity, CARE, for background material on taxation for this debate. Family poverty, in particular child poverty, remains a major problem, in spite of all the good work that the Government have done since 1997. In passing, I ask my noble friend the Minister why the publication of figures on child poverty, which we expected on 2 May, has been deferred until an unspecified date in June, as the figures would have provided a helpful background to this debate.
	In any event, child poverty numbers remain uncomfortably and unacceptably high and there is an urgent task—urgency was a theme of the most reverend Primate's speech—to look again at the way in which the tax credit system impacts on families. Most attention has been focused on reducing poverty among children in lone-parent families, where the parent often does not or cannot work, yet most children in poverty live in two-parent families; in fact, 60 per cent of children in poverty on the before-housing-cost basis live in coupled families and in most two-parent families the parents are in work. Hence, tax credits should be redesigned to give more help to children in two-parent families. I commend the CARE pamphlet by Draper and Beighton, Taxation of Married Families, which was published in January this year.
	It is argued that current policies often have the perverse effect of encouraging parents to live apart, as many families on low to modest incomes are better off if the parents live apart, even when taking into account the extra housing costs. In its report on the so-called "couple penalty", which was published in March, CARE showed that in three-quarters of the families considered the couples were found to be better off living apart. Obviously, that decision to live apart has major cost implications for the Treasury and, clearly, the financial strains of living together can be a significant factor in divorce and the social problems that follow. In my judgment, there is a public interest in taxation encouraging the institution of marriage, as is done on the Continent. When the Government work out whether a family is in poverty, they take account of the financial needs of all the family. To tackle child poverty, tax credits should be redesigned to do the same and fiscal incentives encouraging parents to live apart should be abolished.
	Finally on the major theme covered by the most reverend Primate, I shall talk about credit. It is easy for us in our comfortable position in this House to talk in general terms and not to look at individual problems. Perhaps one of the advantages of those in the other place is that in regular surgeries they are able to meet the victims of the credit crisis, which we are often not so easily able to do. It is true that there has been an explosion in recent years in credit indebtedness, which is likely to increase as a result of the current problems. We stand on the verge of a sustained slowdown, which puts pressure on household budgets. More families are likely to exercise their credit facilities and serious overindebtedness can result. The figures on total UK personal debt, total consumer credit lending, average household debt, average outstanding mortgages and interest repayments all speak for themselves. Obviously, the causes of indebtedness in individuals will vary enormously, but often the person with excessive debt is in no way to blame for rash spending but has experienced unfortunate changes in circumstances beyond his or her control, such as loss of a job, serious illness or breakdown of a relationship.
	As the most reverend Primate underlined, a frequent reason for indebtedness is poor personal financial management by borrowers. In this field, Credit Action, a Christian-based charity, produces a range of materials, including a mobile phone budgeting tool, the Moneybasics Spendometer. It also runs training courses and produces a set of guides to help with money management. These guides include Thinking About Money, which is,
	"a practical guidewith information about basic personal finance",
	Dealing with Debt, which is,
	"a guide to help those already suffering from over-indebtedness",
	Moneymanual for Students, which aims to,
	"help with student finances for those at university",
	and Single Parents Guide, which,
	"deals with the financial issues single parents confront".
	A key driver of our overindebtedness is irresponsible lending by banks and building societies, such as the 125 per cent mortgages or home loans of up to six times the borrower's income, although in the current crisis these are obviously no longer available. The Banking Code, which was updated last month, is a good step but is voluntary and thus not enforceable by any sanctions against irresponsible lenders. When Northern Rock came into difficulties, the management was able to look after itself; the victims were others. Surely the Government and the FSA should examine more effective ways of monitoring and regulating banking activities. We all almost daily receive letters from various lending institutions encouraging us to take out ever more credit cards, to increase our credit and supposedly to take the worry out of borrowing.
	Of course credit gives many people a degree of flexibility and a lifestyle that they would not otherwise enjoy, but it can easily lead to overindebtedness. The Government, financial service firms and the third sector need to work together to increase levels of financial literacy. Further, the Government should press the lending institutions, which bombard us with these offers of credit, to help those who are the victims of their own enthusiasm, perhaps by a percentage levy on turnover. Equally, the Government should give greater resources to free, independent debt advice charities, such as the Consumer Credit Counselling Service, the National Debtline and Citizens Advice, all of which work effectively with the victims and those who suffer from serious indebtedness—those victims whom the most reverend Primate described so well and so graphically.

Baroness O'Cathain: My Lords, I am sure that all noble Lords are as grateful as I am to the most reverend Primate both for tabling the Motion and for speaking so passionately on the impact on the family of economic inequality, credit and indebtedness. He certainly gave us a great deal of food for thought.
	It is difficult for me to speak from personal experience about the impact on the family of economic inequality, credit and indebtedness because I do not really have any relevant and current family experience. My experience of growing up in a family in the post-World War II years—I suggest that my experience was similar to the experience of most at the time—was of a determination never to get into debt. This message certainly impacted on me and my siblings. Whenever we wanted something, we had to save our pennies for it—and I mean pennies.
	The post-World War II years were years when the sun shone, there was never a break-up of family among any of my friends at school, we rode to school on the bus, we were not scared and we were able to walk on the roads on our own with impunity. There was no TV and we had absolutely no idea of what was "out there" to desire in terms of gizmos, Barbie dolls, computer games or trainers. Our greatest wish was for the sweet rationing to end—oh, the delights of my first Mars bar! This sounds ridiculously frivolous but drilled into us was the instruction, "If you want it, you have to save for it". It was not that difficult because we were not constantly bombarded by messages to spend, spend, spend. Nowadays, no one can escape from them. In our homes, we get constant messages from TV, radio, our computers and newspapers. We venture outside our front doors, and buses, tubes and hoardings all proclaim the message that unless we have this brand of trainers or the latest computer games or eat this particular brand of convenience food or drink these alcoholic or fizzy drinks we are somehow second-class citizens without self-worth. It is insidious and it preys on the vulnerable, who do not have the ability to resist because often they do not have a clue about what they call "bending the plastic".
	Added to that, the emphasis on savings has vanished—not only within the family context but in national terms. Why do we not attach any importance to the economic indicator of the saving ratios as a proportion of national income? It used to be one of the most important figures in national accounts—one that was discussed at every Budget. That is no longer the case. When I studied economics a very long time ago, the savings ratio used to be somewhere between 15 per cent in a good year and 11 or 12 per cent in a bad year. In 1997, the savings ratio in UK accounts was 9.5 per cent but in 2005 it was 5.3 per cent. Saving is not encouraged; consumption is.
	For all the reasons that have been discussed in this House on many occasions, there is now a greater incidence of depression in our population than in the past. The most appalling modern slogan, used as a cure-all for depression when one is feeling low or fed up, is "retail therapy". The rot probably set in with a very enticing advertisement in the late 1970s. I am sure that those of us who are old enough will remember it—I know that it won all sorts of awards. I refer to the Access credit card advertisement which said, "Take the waiting out of wanting". As an aside, can anyone enlighten me as to whether an advertising award has ever been won by a savings or pensions product advertisement? Where is our sense of responsibility as a nation when we fail to encourage thrift?
	One may well ask what that has to do with the impact of economic inequality, credit and indebtedness on the family. I suggest a great deal. How do we tackle it? Before I come to some proposals and ask the Minister some questions, I wish to quote just a few statistics as justification for the line that I intend to develop. In 1997, the average financial liability per household in this country was £24, 650. In 2006, this had risen to £55,073—an increase of 123 per cent. Of course, these figures include mortgages but in 1997 unsecured debt per person was £1,943 and in 2006 it had risen to £4,186—an increase of 115 per cent. Thus, investment in housing is not the sole reason why so many get into debt, although of course it is a major factor. The figures that I have just quoted reveal a serious neglect of savings—in fact, a reduction of 44 per cent in the savings ratio. I shall give one final set of most disturbing statistics. In 1998, the number of individuals becoming insolvent totalled 24,549. In 2006, that figure had leapt to over 60,000.
	I truly believe that ignorance of all matters financial, including budgeting and the cumulative effect of credit card debt, is to a very large extent responsible for this. The combination of constant encouragement to buy, buy, buy or spend, spend, spend, plus a worryingly low level of financial literacy, is leading to poverty and the poverty trap, from which it is exceedingly difficult to escape, as we have heard. For example, I wonder whether any research has been done into the number of people who know what the letters APR stand for and what they involve. I asked this last night at a supper party among the chattering classes and the hands all went up as they said, "Sorry, you have us there. We know it's something to do with interest but we don't know".
	On several previous occasions, I have brought the attention of this House to the appallingly low level of financial literacy in this country. The FSA, to be absolutely fair—I have been fairly critical of it over the Northern Rock issue—has been concerned about this for a very long time. Its baseline survey in 2006 showed that 70 per cent of people had made no provision to cover an unexpected drop in income arising from the temporary loss of a job, illness or other change in circumstances. In addition, 81 per cent of pre-retired people recognised that the state pension was unlikely to provide them with the standard of living they had hoped for in retirement, but, even being thus aware, more than a third of them were not making any additional pension provision. We should remember that pensions were very much in the eye of the storm in 2006. In that year, more than 1.5 million people admitted that they were falling behind with bills or credit commitments, and one-third of them said that they had real financial problems. That was very difficult to admit but it was a fact. A third of the people who have general insurance bought it without comparing it with even one other product on the market. Would they do that when buying a car, shoes or a holiday? Finally, 40 per cent of people who own an equity ISA were not aware that it fluctuates with stock market performance, whereas 15 per cent of those buying a cash ISA thought that its value did fluctuate with stock market performance. We are not talking about the people whom the most reverend Primate has been dealing with—those at the bottom of the heap. It is endemic in our society; it starts at the top and goes right down to the bottom.
	I have drawn attention to these examples to show that poor financial literacy is a deep-seated problem in this country and that it has serious implications for all families and at all levels of society. What is the solution? I believe that one answer is likely to require years of systemic education and cultural change, and it certainly includes putting less onus on self-identity linked to consumerism. I am so glad that the most reverend Primate has majored on that. A plain language, non-threatening thought process might go a long way in helping most people, most of the time, to grasp the important fundamentals of financial literacy.
	I was recently shown a five-point plan that could be used. The first item was: do not expect something for nothing; if it looks too good to be true, it almost certainly is. Secondly, recognise risks: what happens when you lose your job or the house burns down? Thirdly, understand the choices available to cover short-term or long-term additional income requirements. Fourthly, budget household expenditure both for the regular and necessary type of expenditure and for discretionary expenditure. Finally, when entering into any financial commitment, be completely aware of your rights and responsibilities. Noble Lords may smile and think that this is all too simplistic, too basic and too elementary, but unfortunately quite a lot of families or individuals would not even consider such a checklist.
	A consistent national approach to building financial skills along those lines might be a powerful tool if it was combined with coaching for teachers and others. There could be a massive opportunity here for many of the large number of people who have retired early from the financial and commercial sectors to mentor others within their local community. Perhaps that idea would appeal to the most reverend Primate the Archbishop. The proposal could be facilitated by a local church community, which would be another use for the premises. It could be a worthwhile additional interest for those with time on their hands who truly want to follow the second great commandment—to love thy neighbour—by practical means.
	Inevitability we look to the Government for ideas and a response. That is not buck-passing. Surely it is in the interests of the Government and the country as a whole that we increase financial literacy. I have no idea whether an international comparison of financial literacy is available or where we would be likely to be placed in an international league table; the issue is too serious and important to waste time looking for comparisons which politicians of all parties would selectively use to score points. We need a united sense of purpose to attack the problem and to attack it now.
	Taking advantage of the excellent initiative of this debate, I should like to ask the Minister some questions of which I have given him notice. I believe that this is a cross-party and truly important House of Lords issue. First, is it true that the Government have proposed that financial capability should be a mandatory statutory requirement for the 2008-09 schools curriculum? If so, has the proposal been dropped? And if so, why?
	I commend the Government on supporting enterprise education in schools. Many children have benefited hugely from this and it is a sure-fire way of increasing financial literacy. The following questions are directly related to the programme. What proportion of the budget given to schools as earmarked for enterprise education has actually been spent on enterprise education? Has it just gone into the pot, and could it end up being spent on building or on equipment for science laboratories and so on? How much duplication exists in the programmes for enterprise education produced by different providers?
	The most reverend Primate the Archbishop of Canterbury should be congratulated most warmly and seriously on initiating this debate. It is a most important issue, one that affects everyone in our country. I hope that one result from the debate will be that people are galvanised into thinking about the issue and searching for solutions to alleviate poverty. This issue needs wholehearted commitment from all of us. It is an issue that transcends the political stance adopted by the different parties and I truly hope that this will be the beginning of something really worth while.

Baroness Sharp of Guildford: My Lords, it is a great pleasure to join others in congratulating the most reverend Primate on introducing an extremely timely debate. As a result of the credit crunch, there has been a great deal of interest in this issue and it is appropriate that this House has an opportunity to debate it now.
	The debate's title refers to "inequality, credit and indebtedness" and to their impact on the family. Inequality, as the most reverend Primate said, leads to poverty and poverty lends itself to indebtedness. I shall mention the other issues, but I want to concentrate my remarks on inequality and the impact on the family and community.
	The noble Baroness, Lady O'Cathain, like me, was brought up in the age of austerity of early post-war Britain. It was a joy when sweet rationing was abandoned and we saved our pennies to go to the local sweet shop to buy humbugs and chocolate. During the 1950s and the 1960s, we saw a steady decline in poverty in Britain and by the 1970s the numbers living in poverty in this country had been reduced to 14 per cent of households—measuring poverty at 60 per cent of median income, which is the standard measurement nowadays.
	Since the end of the 1970s we have seen a reversal of those trends. By 1996 to 1997, 25 per cent of households were living in poverty, compared with the 14 per cent in the mid-1970s. The result of some of the measures introduced by this Labour Government has been to reverse that and in 2006-07 we were back down to 21 per cent of households living in poverty. As the most reverend Primate indicated, 21 per cent of households is 14 million people, including almost 4 million children. The reduction in child poverty during the period 1997 to 2006, from 4.4 million to 3.8 million—a reduction of 600,000—was indeed an achievement, but there is still a very long way to go. It is not clear that the measures that have so far been adopted have further to run and can achieve that more readily.
	It is also important to look at the other extreme. Incomes of the top 1 per cent in the UK have been rising faster than in any other industrial country. In 1979, chief executive officers of the top FTSE 100 firms earned on average 10 times the earnings of their workers; by 2002, that had risen to 54 times the average earnings of their workers; and by 2006, it was 76 times the earnings of their workers.
	During the period from 1997 to 2001, the 0.1 per cent at the very top of the income distribution saw their incomes grow by an average of 8 per cent, whereas the bottom 5 per cent have seen a rather weak growth in incomes, even post tax, after the measures taken by the Government. That combination of the very weak growth for those on the lowest incomes and the very fast growth for those on the top incomes has led to the inequalities.
	There has been a whole series of reports about the inequality and poverty in Britain. A recent Rowntree report issued last year concluded that,
	"Britain is moving back towards levels of inequality in wealth and poverty last seen more than 40 years ago".
	Inevitably, poverty leads to indebtedness because the poor are easy prey to the loan sharks. In modern society, the credit card, as the noble Baroness, Lady O'Cathain, indicated, is an all-too-ready means of flexible plastic. I do not know how many other noble Lords have noticed what their credit card bills say. Your bill may be £500 but you are told, "You have £7,500 still to spend". If I were more gullible, I might rush out to spend £7,500. Many people are very gullible and, on seeing that, they spend that money and then realise they are paying a rate of interest of 25 per cent on the debts that pile up. If they do not pay that, the debts accumulate even faster. Many of us see what is now euphemistically called the "credit crunch" as just retribution for the banks and credit card companies extending loans to many who could not afford to repay them.
	Like the most reverend Primate, I worry that we are breeding a society in which large debts are seen as normal. I agree with him that it is most unfortunate that by introducing student loans, we are encouraging people to feel that unsecured debts do not matter. Even at present levels of student fees, the average debt with which a student leaves university is over £20,000. We expect them to repay those debts. They take primacy over all other repayments at a rate of 9 per cent on top of income tax and national insurance.
	There was an interesting study from the Rainer Foundation last year looking at young people's attitude to debt. It discovered that there is no stigma attached to debt. If young people want something—be it new clothes, cars or holidays—and they do not have the cash, rather than waiting and saving up, the answer is to buy instantly and worry about paying later. Instant gratification is important and the life of "celebs" is looked up to. This attitude of consume now and worry about paying later has kept the economy going as strongly and as long as it has. Consumption has fuelled growth, and it is stumbling as growth is stumbling.
	I entirely endorse the proposal of the most reverend Primate for better financial education and more emphasis on credit unions. As has been mentioned by the noble Lord, Lord Anderson, citizens advice bureaux do a splendid job giving financial advice but do not get enough support from society. Our local bureau knows the limitation of the funds available to it, although the demands on it are growing.
	I return to the question of inequalities and ask whether they matter. There are a number of interesting features about the new inequalities that we see in society today. The Rowntree study, for example, showed that there was an increased clustering with the well-to-do tending to migrate to particular areas within and around cities, and the poor going to other areas. I do not know whether other noble Lords dislike as much as I do the new fashion for gated communities. They send out all the wrong messages.
	Another finding from the Rowntree study was about social mobility, which indicated that the chances of a poor child growing up into a poor adult were greater now than they had been in the 1960s and 1970s. Above all, there is the awful statistic that by the age of three, children from poor backgrounds lag a full year behind their middle class counterparts. It is difficult for schools to overcome these innate social differences.
	We know that these inequalities in income and welfare are echoed in other inequalities—health, education and housing. It is always difficult to resist the demands of the articulate and demanding middle classes as customers. Where there is choice, as the Sutton Trust has shown, the middle classes do very well for themselves and segregation is usually exacerbated. The more choice that is offered the more the middle classes will take.
	It is less well recognised that crime, violence and hooliganism are also linked not just with income levels—obviously poor communities suffer more from crime—but with income inequalities. A number of interesting studies in the United States and Canada of city states and provinces have shown a close association with the levels of income inequality between the city or state region and the levels of crime and violence. Linked to this, we also know that high levels of crime create a breakdown of trust within communities. It is much more difficult to build community organisations and a sense of community and belonging that is so important not just for the individual but for the family.
	I go back to the generation that was brought up in terms of social policy on Peter Townsend's Kith and Kinship in Bethnal Green. It was that sense of belonging to a community that was so important to the families there. In those days family and community were intertwined, and a sense of belonging to both was there. A child had a plethora of aunties living down the street who could be called upon if mum was out or if help or sympathy were needed. It was that sense of community and belonging that perhaps helps to explain the conundrum raised by the noble Lord, Lord Layard, in his writings about happiness. We are so much richer than we were in the 1950s, so why are we so much unhappier as a society? Is it because we have lost this sense of family within our community?
	Unlike John Hutton, I do not think that all that matters about inequality is bringing those at the bottom closer to the middle, and that we should have no hesitation in celebrating the enormous salaries of the City. Inequality matters and erodes the sense of belonging and community within society. In this age of instant gratification how does the 16 year-old in the bottom 5 per cent of the income distribution table find £100 to buy that coveted pair of trainers? If he can lay his hands on a credit card, he will, and buy now, pay later, but it is far more likely that he will see that the only way to a fast buck is to get involved in drugs and crime like so many of his contemporaries.
	These problems are not absent in other countries but evidence suggests that they are less pressing in those countries and communities where the inequalities are less. We often say of the Scandinavian countries that things are so much easier for them because they are small and so much more homogenous. If we were somewhat smaller and homogenous perhaps we would find things easier.

Lord Haskel: My Lords, I am most grateful to the most reverend Primate for moving this Motion. We debated a similar one last month and he has given us the opportunity to reflect on what was said and to continue the debate.
	The effect of income inequality and debt is there for all to see. As noble Lords have said, it affects health, education, housing, careers, life expectancy, life chances and debt. It also affects the proportion of people in prison and, very importantly, people's dependency on public services, which are especially important to those in debt who need to be supported.
	Yes, the effects of poverty run long and deep. Longitudinal studies show that deprivation from poverty is handed on from generation to generation. That is why it is so important to break the cycle. Government must take steps to do that, not only because such inequalities lead to crime and social upheaval, but because it is unfair and immoral, as the most reverend Primate said. This unfairness will undermine the very society that we are trying to create for the economic prosperity of the nation. The question is how to do it. There was a time when simple income redistribution was the answer. Financial education has a role and, indeed, the Financial Services Authority has a budget for this. Regulation, too, has a role. About two years ago the Competition Commission investigated doorstep lending and broke up some of the cartels that were maintaining the very high rates of interest.
	Life has become more complicated. Globalisation and technology has changed our way of life. I have no doubt that globalisation has played a large part in causing an increasing level of inequality and debt. The UN human development reports show that the Geni coefficient of income distribution is increasing in all the developed countries, and most of all in the US and UK. Our membership of the single market and its enlargement have created yet more competition for businesses and jobs. Quite rightly we rejected protectionism, so we live an era of economic liberalism and global engagement. As others have put it, we are engaged in a race to the top. In such a competitive society we have to take steps to empower people to improve themselves to cope with its threats and pressures. Education, skills, innovation and investment are all essential public services. Because we cannot set the limits on empowerment the impact on families will vary, so economic inequalities will rise. The noble Baroness, Lady Sharp, gave us the numbers, but that is the explanation.
	Here in the UK, we have a strong egalitarian ethos, so what has made the effects of that income inequality politically acceptable? In a word, it is housing. Whether you owned or rented, rising house prices created a sense of increasing wealth regardless of income. We have had a long period of declining interest rates, so remortgaging our homes has been a convenient source of funds and security for the debt. But that source of wealth is disappearing and, as a result, the inequalities are starting to grate. There is the lack of correlation between company performance and high earnings. Taxpayers picking up the bill when banks fail irritates. An overclose relationship with rich businessmen is looked at differently. Some of the more perceptive businessmen agreed that it was unfair for private equity partners to pay tax at a lower rate than their cleaners, but that seemed only to add to the irritation.
	What seems clear is that inequality in family income is becoming less tolerated because it is perceived to be unfair. One thing that struck me about the debate last month was the insistence on the concept of fairness. I remember that when I first came into your Lordships' House, Lord Houghton, who came into politics through the Inland Revenue Staff Federation, frequently warned us that we would never be able to collect tax if the population thought that the system was unfair. He was right then and he is right now. The Government are now perceived as being too timid in taxing the very well-off. After all, they have benefited from a stable and well managed economy just as much as the rest of us. If they are not perceived to be paying their fair share of tax, the Government are storing up trouble for themselves.
	After all, taxation works in all parts of society—at the top and at the bottom. Despite recent controversy, Labour has been very generous to those at the bottom—generous to children, generous to pensioners, generous to the low-paid—but much of that generosity was made in the form of tax credits, and tax credits have just not penetrated public perception. They just do not feel that redistribution has taken place. A Tory agenda of tax-cutting would be much more populist, but it would do nothing to cut family inequalities relating to children, pensioners and low-paid working people.
	Is all that a sign that there is something wrong with the Government's economic and social model? It is a sign that our politics will have to change? I do not think that there is something wrong with the economic model, but we are at a point of correction. It may help family inequalities if we are less inclined to use our houses as a source of income. You never know, it might encourage us to listen to the noble Baroness, Lady O'Cathain, and start saving again. That correction away from domestic spending towards exports must help us face up to globalisation.
	In that competitive society, we must raise our game in financial services. The most reverend Primate is too selective in his remarks. The standard of management must be raised throughout the whole sector. The Institute for International Finance recently issued a devastating report on that. It identified deteriorating standards, weakness in understanding products, weakness in understanding exposure to risk, and declining standards in underwriting. All that is supported by Mr Paul Myners in his article in today's Financial Times, in which he points out that bank directors were largely in the dark about the huge risks run by their staff. Add to that the banks' excessive charges—which are being challenged in the courts, so I do not want to say too much about them—and one is forced to agree with the Governor of the Bank of England, who said this week that the bail-out was not to protect the banks but to protect the public from the banks. That is where there must be an improvement not only in management but in a sense of responsibility.
	I think that the Government are right: British families will cope best with the crisis, but we shall have to deal more carefully and identify more closely with the personal misery that it is causing. It is no compensation to say that the misery is caused by circumstances outside our control. The Government and the industry will have to do more. The changes in politics will be more subtle. Because the cause of economic inequality in families relates to globalisation, our reaction to globalisation will have an impact on families. This is not a matter of left and right in politics, but a matter of whether we open up our society and compete in the race to the top or close it off and do not compete. Although it may be tougher on families, although it may require more change and although it may lead to more inequality, most of us will thrive in the more open society, but we must listen to the right reverend Primate and be fair to those who cannot cope.

Lord Northbourne: My Lords, I add my voice to those thanking the most reverend Primate for introducing this very important subject for debate. I agree with every word that he said and with most of what has been said in several brilliant speeches by subsequent speakers. The most reverend Primate is absolutely right to say that there is a strong statistical correlation between family poverty and poor incomes for children. He is absolutely right to say to say that debt can be seriously harmful to children. When I was a trustee of Toynbee Hall in Stepney, I saw at first hand the horrendous problems created by street money lenders.
	Others who have spoken and who are going to speak have greater knowledge than I on the subject of debt. I want to take a slightly different slant on child poverty and inequality. Of course the battle to eliminate child poverty must go on and must be won. However, as several noble Lords have already done, I beg to doubt whether it can be won simply by throwing more money at it. The demands put on families with children today are greater than ever before. Without the right input from parents, as well as the state, child poverty will never be defeated.
	To reduce child poverty, we need a two-pronged attack. We need to reduce the number of families who need help, and then we need to spend more money on those who really cannot help themselves. Some families will always need state intervention, but healthy relationships within the family and the commitment of both parents to the well-being of their child can also be powerful factors in defeating child poverty. The noble Lord, Lord Anderson, referred to two-parent families as themselves having real problems with debt. I am talking not about whether the family is a one-parent or a two-parent family but whether it has two committed parents.
	In too many families today, there is competition for the available adult time and energy. The competition is between the need to earn the money to support the family and the need to provide for the safety, love, shared time and social education that every child needs. With a little help, two parents or two partners working together in harmony can achieve that, but where the second partner is either absent or does not play their part, that job becomes almost impossible. Yet, in our society today, at any one time approximately 25 per cent of the nation's mothers are attempting to bring up their children alone, with only the help of benefits and tax credits. Some 800,000 children have no meaningful contact with their father. In practice, what the state can provide today for single parents is less than adequate. Statistics show that child poverty today is more common in families who are dysfunctional. That situation is at the heart of much child poverty in this country today.
	All children are different, but every young child needs to feel safe and loved and to spend quite a lot of time with a parent or other long-term committed adult. They need to develop self-confidence and to learn the simple social skills that will enable them to prosper at nursery school and subsequently through their school career. Security, love and shared time are the language of commitment and the currency of good relationships within the family. From Bowlby and Ainsworth's original work on secure attachment right through to very recent understandings about the way in which a child's brain develops, a picture emerges of the fundamental importance for a child's healthy development of a secure and loving relationship in the family, with at least one but preferably two or more trusted adults. A couple of years ago, Charles Desforges showed that relationships within the family are more important for a child's success in school and in later life than any other single factor, including poor schooling and family poverty.
	Ever since the beginning of recorded history, and I suspect long before, every successful society has had strategies to provide for and to ensure the effective care and education of its children. In this country today, we have lost the plot. We seem to be unsure, or at least to disagree among ourselves, whether it is the responsibility of the mother, the father, both parents, the family, the community or the state to provide the care, nurture and education that this nation's children need. In particular, we seem to be unsure about the role of fathers. Do fathers in our society have any greater responsibility to their child than simply to pay a limited amount of maintenance to the resident parent? I do not know, but I believe they have.
	Good relationships within the family, and the well-being of the children in it, depend on the long-term commitment of the adults involved. I am convinced that we as a society need to pay much more attention to the importance for the child of long-term committed relationships in the family, and particularly to the key role of at least two adults who have made a long-term commitment to the child's well-being. Commitment is a key factor in the upbringing of a child. Lack of that commitment is a key factor in child poverty.
	At present, this Government, for tax and benefit purposes, seem to be working on the principle that there is no difference between two parents who have made a long-term commitment to one another for the good of their child, two parents who have made only a short-term commitment, and two parents who have made no commitment at all. Despite the acknowledged advantages to the child of a stable and committed parental relationship, the Government have done little to encourage such relationships. Nor have they offered any financial encouragement to those who have voluntarily entered into them, despite the huge savings to the Exchequer from stable and self-supporting families. This Government have declared repeatedly at the Dispatch Box that they do not believe that it is the job of government to interfere in any way in how adults chose to live their lives. This turn of phrase troubles me. I have not given the Minister notice of this question and will understand if he does not answer it, but will he confirm that this policy does not extend to parental behaviour that may damage the life chances of a child?
	It is clear that there is a need for change. If we seriously want to reduce child poverty, one ingredient must be that more families can look after themselves. Resources can then be released to help more effectively those who truly cannot help themselves. This is entirely possible, but it will involve acceptance in our society that having a child is a right that carries with it serious obligations and that the choice to have children may involve, for the mother and the father, sacrificing some of their other lifestyle choices. If you want to achieve this kind of change, the first step must be to annunciate clearly what change is needed and the reasons why. The second step is to ask for positive, rather than negative, incentives.
	This debate provides an ideal opportunity for me to invite the Government and the churches to work together to do three things: first, to define more clearly the responsibilities and rights of parents, including fathers, so that they can know what is expected of them; secondly, to develop a campaign to educate the public about the importance for every child of long-term commitment by both parents; and, thirdly, to do more to encourage and support financially, and in other ways such as housing, parents who together make a long-term commitment to their child.
	The responsibilities of parents are simply and clearly defined in Scottish law in the Children (Scotland) Act 1995. There is no comparable, simple and clear law in England. Why not? There should be. A clear statement of the policy of this Government of the way in which the burden of responsibilities for raising the nation's children should be shared between mothers and fathers, the extended family and the state would be an important step towards reducing child poverty.

The Lord Bishop of Newcastle: My Lords, I too am very grateful to the most reverend Primate the Archbishop of Canterbury for giving us this opportunity to debate one of the most pressing issues facing our society.
	Economic inequality and poverty are two of the social evils of our day. Those words are not mine; they come from the Joseph Rowntree Foundation's latest research, which was published this month. Poverty and inequality are identified as social evils at both the individual and the community level. In the research, one participant described being poor as "struggling all the time. You have no choices in life. That is what poverty does for you—it gives you no choice". For communities, participants described how, in a deprived community, making money from drug dealing can be an attractive option. I have seen first-hand evidence of that from my time working in south London as well as in the north-east. Inequality and poverty can undermine aspirations and replace mainstream options, and indeed moral frameworks, with negative and ultimately destructive ones.
	We are all too aware of how poverty and social exclusion go hand in hand. It is still true today that, despite all the efforts of the Government, some families cannot provide the basic necessities of food and warmth. It is still true today that some families cannot provide the social necessities that are generally accepted as part of normal life. It is also still true today that inequality and poverty impose massive day-to-day limitations that undermine a family's sense of security and deny any possibility of planning for the future. The next crisis of whatever kind is just around the corner, and it is impossible to meet it.
	Last week, I talked to someone who said, "You know, Bishop, you continue to pay the loan shark even when you don't owe him anything, because you never know when you might need to use him again". On one estate in Newcastle, 87 per cent of 142 households were paying doorstep lenders an average of one-third of their total weekly income. Fourteen such lending firms operate across the city alone.
	As the most reverend Primate the Archbishop of Canterbury mentioned when he introduced the debate, we need an expansion of credit unions, much tighter regulation on doorstep lending, and financial education in schools, not only for pupils but for their families. But the basic point remains of the fragility of family life because of all the pressures that flow from poor income levels. There is no cushion of any kind. The links between low income and ill health, and between low income and earlier death, are also well documented, as is the poorer mental health that people in poverty experience. That is why some GP surgeries are offering debt advice services. The real problem is that all these inequalities coalesce and compound each other, and lead to a sense of isolation and social exclusion from mainstream society, which is why the Joseph Rowntree Foundation describes them as the social evils of today.
	What is to be done? In Newcastle, the levels of poverty and inequality are much higher than the national average. One-third of our children in state schools live in out-of-work families. Hardly surprisingly, child deprivation is linked to worse educational outcomes. So if a person is trapped into this cycle of despair with low income, lack of work, and poor housing and schools, how can a person, particularly a young person, be helped to break out of this cycle of impoverishment?
	The only way that I know is through giving our young people the very best education and opportunities that we can. I would suggest that a successful education is the single, most protective factor that we can give to any child. I shall give noble Lords one small example from the north-east, with which I have been a little involved. Six years ago, the city council offered two failed secondary schools—I hate using the word "failed", but that is how they were described—to the Church of England. The schools inevitably served children and their families from some of the really poor estates in the city. When we took over responsibility, the two schools became one on one of the existing sites. If ever there was a recipe for an experiment to fail, that was it.
	All Saints College—the new name—inherited a situation where there were only four young people in the sixth form. No one had ever been to university from either of the previous schools. Six years on, through the sheer dedication, skill and hard work of the head teacher and staff, to whom I pay the most enormous of tributes, the sixth form now has 120 students. The first four students went to university last year and, all being well, 16 will go this year. That seems to me to be one way in which a significant difference can be made to the impact of economic inequality on the lives of young people.
	When we began in that school, we had to provide every pupil with a pair of black shoes and a modest school uniform, because that was the only way it could be done. The school day was remodelled. There was a major crackdown on attendance; school rules were carefully explained and strictly enforced; and Christian values and ethos underlined everything that went on, without being in any way overbearing. The school was and is open to all. It is open to people of all faiths and none. It is a truly inclusive community school.
	I am pleased to say that that school has turned around because of the passion, the commitment and the leadership offered. The head teacher is a "head teacher". He understands children and understands what teaching and learning are all about, and it is not about management. Everyone has refused to accept second best for our children. If all schools in my city in the north-east are to enhance the life chances of young people and to offer the opportunity for them to overcome the social and economic realities in which far too many find themselves, that is what we will have to do. The biggest gaps in Newcastle in terms of child achievement are directly related to and directly connected with economic well-being. One of the most powerful predictors of a young person's success is simply their attendance at school.
	New buildings are very important too, which is why the academies programme focused in areas of deprivation and developed by government has been so hugely significant. Academies make a difference. They make a difference to morale and make people feel valued. They hold to the highest aspirations, despite all the evidence that is stacked up against them, which gives students the signals that it is possible to achieve what they aspire to. It also gives them the signal that inside everyone there is energy to achieve, which has to be liberated from within. It is what we might call the "Billy Elliott" factor.
	In conclusion, economic inequality, poverty and debt can do terrible things to individuals. They can, and do, do terrible things to families and to communities. They can rightly be described as social evils, and they demand the very best efforts of government departments working together, the voluntary sector, local authorities, churches and faith groups. Those social evils demand the best efforts of all of us to overcome them.

Lord Patten: My Lords, I am very glad to follow the right reverend Prelate the Bishop of Newcastle in what he has just said. I shall particularly reflect on his striking motif that we need to attempt to liberate the energy to achieve. There is much cause for reflection there, as there was much cause for reflection in the opening speech by the most reverend Primate the Archbishop of Canterbury. It was a wide-ranging speech, which ranged from student finances to St Paul's letter to the Thessalonians. I shall consult my own special adviser on this—our dear daughter, Mary-Claire, who, up there at Cambridge, reading theology, can give me relevant and up-to-date views on both those critical issues.
	That said, we all recognise poverty when we see it and we all deplore, I am sure, those who prey on the poor. Yet, poverty status on the one hand and a sense of being poor on the other are not always the same. The marvellous ongoing study, the Millennium Cohort Study, reports that, since it started, four out of 10 people finding it difficult to manage lived on an income which was estimated to be above the poverty line. So, not all those who could not manage were below the poverty line. Yet a further nearly one out of 10 people—the exact figure for the statistically minded is 8 per cent—reported that they "lived comfortably", while having an income which is below the poverty threshold. It is a very complex issue being reported by the Millennium Cohort Study. That said, many sorts of poverty affect the family in addition to the purely financial, as the most reverend Primate pointed out in his opening speech; namely, spiritual poverty and emotional poverty, and, sometimes, just a simple lack of guidance. All those things, not only often interrelate with economic inequality, they sometimes help to cause it.
	Let us ponder a recent report written by Jim Richards, the tough-minded, but, I guess, warm-hearted CEO of the Westminster branch of the Catholic Children's Society, on how its family centres have helped mothers to become classroom assistants and be able to enter other relevant jobs in order to lift themselves out of poverty. He writes:
	"Our part was to explain to the mothers that the jobs existed, show them the advertisements and advise them on filling in the forms and how to tackle being interviewed".
	In short, people were made to realise that they had skills and values. This approach has helped to iron out not only income inequality but spiritual poverty and lack of self-esteem at the same time—a kind of triple win for those who benefited from that advice.
	I want to make three points to illustrate my overall theme, the first of which is rather brief. We need to recognise the serious geographical inequalities in this respect, where poverty exists in rural areas. There are very small pockets of poverty scattered in remoter country areas. These people often share exactly the same low incomes as their urban brothers and sisters, but at the same time they enjoy, if that is the right word, none of the ease of access to a nearby doctor, school or advice centre as is typical in towns and which helps at the margins to mitigate the worst manifestations of living in poverty. Such people cannot simply walk around the corner to an accident and emergency unit or to the dentist, and often they do not have a car and absolutely no public transport to take them to a nearby cinema or club. They are truly isolated, and children have to be bussed many miles to school. Sometimes I think that the truly poor in rural areas are the most forgotten poor of all.
	My second point follows on what was said by the noble Lord, Lord Northbourne, who is not in his place at the moment. Families that do not have fathers often face more serious problems in terms of income and prospects than those that do. This is an inconvenient truth for many people. Current judicial and social policies rightly stress not just the emotional and the spiritual, but the practical benefits that fathers bring to their offspring. An all-too-rare and unusually settled research-based consensus shows the benefits of there being a father. The list is formidable, with children's life chances being enhanced in many ways, from less criminal behaviour through to better health and educational achievement, and not only that, but to a greater potential earning power in the future. One does not have to be a demented familista to assert this, because not only for once does the research really prove something, happily it seems to do so across the whole political and economic spectrum, from left to right and back again.
	Even the Equal Opportunities Commission of blessed memory had research since the beginning of this decade to show that children whose fathers have been actively involved in their lives not only end up in better relationships and enjoy greater personal satisfaction but do demonstrably better later in life in terms of their economic circumstances. While the presence of a father in the home is not always a universal panacea or cure-all for personal and social ills, let alone a guarantee of financial success, it helps a great deal in all these respects.
	Thirdly, we should consider openly the benefits of marriage in helping to iron out economic inequalities. While marriage is no more of a magic cure in all cases than is fatherhood, there are serious public and private benefits in marriage as an institution. Relegating issues such as religious approval or moral feelings to the footnotes of this debate and adopting a strictly practical and utilitarian approach, one fact is clear, and that is that in the generality, marriage helps family income. It is dreadfully unfashionable to say this kind of thing, and I hope that your Lordships will forgive me. However, a whole corpus of academic findings shows that marriage makes men in particular more successful. Indeed, there is something called a wage premium for married men, normally reckoned to be between 20 per cent and 30 per cent more than they would otherwise achieve. I am told that it is one of the most well documented, yet peculiarly one of the most unsung phenomena, in social science and is common to all developed countries, including the United Kingdom. I have tried to read as widely as I can on this issue. I see the noble Lord, Lord Desai, in his place, who will have the opportunity later to correct me if I have not read widely enough.
	Alas, when divorce happens, household income plummets by at least the same percentage—20 per cent to 30 per cent. That is the generality because it does not occur in every case, and again is based on the findings of scholarship. Households move into poverty with a dreadful inevitability. Being even more unfashionable, if I may, I assert that the risk of poverty after break-up is even worse for cohabiting parents. The evidence shows that cohabiting parents are about four times more likely to part than married parents. It is a hard fact that unless the rates of divorce and breakdown of cohabitation are stabilised and then reversed, the cost to the public purse will skyrocket further and the ranks of the poor will be multiplied.
	I have another suspicion—I use the word with care because I do not have the evidence to say that I am right—that there is financial inequality in relation to public support for poor married couples as compared with poor cohabitees. The noble Lord, Lord Anderson of Swansea, who is not in his place just now, touched on this in his speech when referring to where he felt that there is inequality in tax credits; that is, between those who are living together and those who are married. I think that he made an extremely important point.
	The problem for people like me, those who want to know whether this suspicion is right or wrong, is that government statistics conflate marriage and cohabitation so that income data which are broken down by these status types simply do not exist. Some people assert that married couples get less on occasion. I do not know if it is true or not, but the Government refuse to clear up the matter. I believe that there is a conspiracy of statistical silence on the part of the Government in order to hide a truth that may be inconvenient and certainly is not welcomed in many circles today.
	The noble Lord, Lord Davies of Oldham, is the Minister who is to wind up the debate today, as he did on a similar issue introduced by the noble and right reverend Lord, Lord Harries of Pentregarth, on 27 March. I raised this issue in that debate, but the noble Lord did not have the time, alas, to deal fully with my request for elucidation as to whether the Government will stop conflating and start discriminating between the married and the cohabiting. I hope that he will find the time to do so this afternoon, but I have taken a small side bet with myself that he probably will not.

Baroness Greengross: My Lords, it is a privilege to take part in this debate, initiated by the most reverend Primate the Archbishop of Canterbury. An online public consultation carried out just this month by the Joseph Rowntree Foundation showed that poverty is viewed as a corrosive social evil in an affluent society, underpinning other social problems such as homelessness and family breakdown. We know that the effect of poverty on families is enormous. The difficulties faced by people trying to overcome their problems often seem absolutely insuperable, and women are still far more vulnerable than men. Figures from the Office for National Statistics show that women in their 40s who take a career break to bring up their children carry on earning 20 per cent less than men from that time.
	There is even greater poverty for those out of work. The poverty rate for lone parents, usually women, are higher than in any other type of family. In London, 39 per cent of children with workless lone parents are living in poverty. While the risk of financial inequality is highest for families with no adult employment, it is also prevalent for large families where only one parent works. In February, the London Child Poverty Commission found that 30 per cent of children in families where only one parent works are living in poverty. This, as we know, affects children's life chances. The potential for a good life and good outcomes is determined to a much greater extent by children's socio-economic status than by their ability or the effort they make. Less able rich children overtake more able poor children by the age of six. Race, gender and any disability contribute significant and additional hurdles to securing good outcomes. Children who were bright at the age of two but came from poor backgrounds, lost ground on those from richer backgrounds from the age of five and were likely to be overtaken by the age of seven. We know that this difference continues into adulthood. A recent study by Blanden showed that a son from a family with twice as much income as another family will earn on average 12 per cent more in his early 30s than a son from the second family.
	Tackling childhood disadvantage and poverty, we know, is the key to opening up better life chances because of the strong connection between early experience and later outcomes. Those who have low socio-economic status are the least likely to secure good outcomes, and disadvantage, inequality and poverty in childhood lead to the same in adult life and the same, indeed, for the next generation of children.
	We know that unemployment has direct effects on families, causing poor health, stress, huge problems in marriage and enormous problems—to take one example—with alcoholism. Twelve per cent of the unemployed population drink 30 to 39 units of alcohol a week, whereas only 7 per cent of the employed population drink the same amount, and we know the drastic effects of the abuse of alcohol on family life.
	All these stresses and hardships are exacerbated if someone happens to be disabled. Nearly 70 per cent of workless families have one parent who is disabled, and about a quarter of a million lone parents who are out of work have a disability. People who are disabled often rely, as we know, on informal carers, who have to leave their jobs to take on their caring role, leading them to poverty and affecting their family's ability to function as well as it might.
	I end with mentioning human rights. It has been said that discrimination against people on the grounds of their poverty is a common but relatively unacknowledged feature of life in this country. It is sometimes based on views that people living in poverty are inferior and of lesser value than others. As a commissioner on the Equality and Human Rights Commission, I am required to prioritise the rights that are protected by the UK's Human Rights Act, and these generally exclude economic, social and cultural rights. Moreover, UK equality law does not at present specifically cover poverty, which means that the commission cannot take anti-discrimination cases on poverty as it can when discrimination is based on other factors. Perhaps when the eagerly awaited single equality Bill comes to Parliament we will be able to remedy this situation and help to overcome the social evil, about which many people have spoken eloquently, that scars our society. It throws up a range of problems and will continue to throw up problems for all of us, whether we are rich or poor, as this century progresses. It is a priority for all of us.

Lord Watson of Invergowrie: My Lords, I welcome the opportunity to participate in this important debate initiated by the most reverend Primate.
	In preparing to do so, it came as a surprise to learn that British consumers are on average twice as indebted as those in continental Europe. Even before the credit crunch, an increasing number of banks were denying customer loan applications as they tried to reduce their debt exposure. Last year around 40 per cent of applications were rejected; the current rate is anything up to 75 per cent. That means major problems for prospective borrowers who suddenly find themselves with existing debts that they are unable to pay.
	Rising mortgage costs and increasing inflation are putting pressure on homeowners and perhaps 3 million could lose their homes through repossession this year alone. It must be hoped that the Chancellor was successful in his meeting with mortgage lenders earlier this week in convincing them to use repossession only as a very last resort. Nevertheless, repossessions will rise this year, and the mix of increasing debt together with rising mortgages and increasing costs of fuel, energy and food means that households—and by no means only the poorest—will face a real struggle to keep up with bill payments. This has to be set within the context of pay rises currently running below the level of inflation.
	This impacts most on families and there are a number of steps that could be taken to ensure that people are given more help in dealing with debt—or, more importantly, avoiding falling into unmanageable debt in the first place. Too many families are forced to rely on doorstep lending, official or unofficial. The latter is more appropriately a matter for the police, but there needs to be increased transparency in the home credit market in order to help to reduce extortionate interest rates and thus assist more people out of poverty. That matter was of course eloquently referred to by the most reverend Primate in his address.
	He spoke also of credit unions, which are an important means of assisting families without access to loans through the normal means. They can also engender a habit of saving, even if only in small amounts, and credit unions should be strengthened, supported and expanded. They are a safe and cheap means of saving and borrowing and there needs to be a reduction in the excess regulation that is largely responsible for the restricted size of the credit union network. I hope that the Government's current review of the means by which credit unions operate will achieve this and lead to a significant increase in the number of those valuable organisations.
	I believe that banks should be subject to a customers' charter, with legal underpinning. A bank customers' charter should be drawn up, replacing the existing voluntary banking code which monitors current accounts and the various other bank products.
	But it is not merely about getting people out of debt; it is also about providing people with the knowledge and skills that they need to stay free of serious debt and the social problems inextricably linked with that for as much of their lives as possible.
	The scale of the problem should not be underplayed. Nationally, 27 per cent of people in the UK have no savings at all; 25 per cent of the poorest are at least £200 in debt; 12 per cent of households, and many more individuals, have no bank account; and even for those with basic accounts, banks rarely lend to those who most need it. That was before the credit crunch emerged last year.
	A quarter of households have no insurance, which meant that the floods in Yorkshire and Gloucestershire last summer were utterly devastating for many families who literally lost everything. In the aftermath, those with no debts could borrow up to £1,000 from the Social Fund, but where they did so it is being clawed back from their benefits within a year. Unemployed single adults receiving the jobseeker's allowance of £59.15 per week are having £20 deducted for a Social Fund loan. If such a calamity were ever to strike London, the proportion reduced to penury would be far higher than national figures because half of the children in the capital live beneath the poverty line. Indeed, you need to travel only eight stops eastwards on the Underground, from Westminster to Canning Town, to encounter a drop of eight years in the life expectancy of the communities surrounding these two stations. That is as great as the difference in the life expectancy in the UK as a whole and Nicaragua.
	Within the UK the gap is widening. Twenty years ago there was a difference in life expectancy of about five years for males depending on whether they lived in Glasgow or the south-east of England. Today, that difference has stretched to more than nine years. Poverty brings ill health and earlier death; increasing inequality brings about starker contrasts.
	The recent report of the Institute for Fiscal Studies points out that the poor have fared better under Labour since 1997, with greater growth than those on higher incomes. Despite this, income inequality has remained at historically high levels. The IFS explains this by demonstrating that those on the highest income—the top 10 per cent—experienced the fastest income growth, while those on the lowest incomes—the poorest 15 per cent—saw much slower income growth. Thus, at the extremes the gap has been most pronounced and has therefore widened.
	There are still 3.8 million children living in poverty in the UK, which equates shockingly to one in three. In 1997 there were 1.4 million children of poor parents living in working households, and that remains the number today. The Government have committed themselves to halving child poverty by 2010 and the Chancellor's Budget last month contained proposals to make up some of the ground lost in moving towards that target. But the Government made an error in making equality of opportunity their target rather than equality of outcome.
	The pursuit of equality of opportunity requires greater material equality. For individuals to realise their potential they must have roughly similar economic starting points. Nothing approximating that exists in the UK today. There are large inequalities of wealth and income that are fundamentally unjust and unfair. It is a situation that cannot plausibly be defended as deserved rewards for varying talents. Economic inequality distributes individual freedom unequally: the better off you are, the greater ability you have to live your life as you want without interference from others.
	Three years ago, Professor Richard Wilkinson, in his book, The Impact of Inequality, illustrated that what matters most is not wealth or poverty, but your place on the social ladder. He assembled evidence form all over the world showing the effects of extreme inequality, leading to the conclusion that, however rich a country is, it will still be more dysfunctional, more violent, ill and depressed if the gap between social classes grows too wide. His conclusion was that poorer countries with fairer wealth distribution are healthier and happier than those that are richer but more unequal.
	Despite the many positive steps taken by the Government since 1997, infant mortality and life expectancy figures—two symptoms of inequality—are both moving in the wrong direction. Wilkinson suggests one reason for this, pointing out that life expectancy in rich nations correlates precisely with levels of equality. Thus, Greece, with half the GDP per head, has longer life expectancy than the United States of America.
	People, says Wilkinson, are the same. Social status and respect matter beyond anything, and the psychological damage done by being at the bottom is devastating. In a review of Wilkinson's book, the commentator, Polly Toynbee, characteristically pulled no punches. She said:
	"Low pay tells people that their labour and they themselves are worth little. Poverty is not, as the government imagines, a line to pull people over but it is a position on a line. Children on free school meals, with no holidays to talk about, unable to afford school trips, who never invite anyone back to a shabby home, painfully understand their place in the hierarchy from their first day at school. Adults know the same, noses pressed up against the window of lifestyle shows on TV. Inequality is the real enemy".
	Since 1997, the Government have implemented a raft of redistributive policies, such as the new tax credit for the low paid, though too many remain below the line, despite the introduction of social support for low income families in difficulty, with childcare and nursery education, and now 3,500 Sure Start children's centres for new parents. Universal childcare is on the way, and this is allied to flexible working, which millions of women now claim from their employers. Maternity pay has doubled in value and tripled in time off work, and women have gained most from the introduction of the national minimum wage.
	All of this has helped many families, yet working-age people without children now suffer record levels of poverty. If you are poor, and neither a pensioner nor a parent, you are worse off. That is why it was so important that the damage caused to these groups by the recent abandonment of the 10 pence tax band had to be repaired. And it is to the Government's great credit that, having listened, that is now being done.
	Last year's UNICEF report on childhood in industrialised countries revealed that the UK still has one of the highest rates of child poverty in Europe, despite being one of the wealthiest countries in the world. The same report demonstrated that the UK is one of the most unequal societies in the OECD. These two statistics are not unrelated, and they impact most of all on children. Their family environment is vital in deciding the quality of life of any child, and until the equality gap is at least narrowed, child poverty will remain a stain on this country's reputation.

Lord Borrie: My Lords, I congratulate the most reverend Primate the Archbishop of Canterbury on initiating this debate. It is both timely and timeless. It is timely because of the credit crunch, the fall in house prices, the risk of negative equity and the growing gap between rich and poor. It is timeless because usury, the money lenders in the temple, the rich man in his castle and the poor man at his gate are biblical and modern phenomena.
	In the course of my remarks I shall stress the hardship that can be caused by irresponsible lending and irresponsible borrowing, but at the outset I should like to follow some points alluded to by the noble Baroness, Lady Sharp of Guildford—that for many people during the post-war years it has made sound economic sense to enjoy and benefit from motorcars and other new consumer durables bought on credit and paid for out of rising real incomes; after all, it was largely a period of full employment and of marked growth in people's real earnings. Moreover, when inflation began to rise in the 1970s, it made no sense to wait before buying: the price would undoubtedly be higher if you did. Buying a house on credit made the greatest sense because inflation ensured that its capital value increased while your repayments gradually took a smaller percentage of your income.
	Successive Governments, bearing those points in mind, have been reluctant to restrict access to credit, because the great majority of people have been seen to use credit wisely and derive benefit from it. The trouble, as so many speakers have emphasised today, is that this easy-going, complacent and optimistic attitude rests too heavily on a concentration and combination of assumptions that have proved to be of only temporary validity—full employment, both partners at work, steady rises in real incomes, low interest rates and a high rate of inflation. These things have not proved to be in any way permanent.
	I mentioned irresponsible lending and borrowing. There is no doubt that borrowers have behaved, and continue to behave, irresponsibly, allowing themselves to become overcommitted, to become hooked on being in hock, and then to be the likely casualties or victims of the credit society. However, I believe that a greater responsibility rests on those who engage in irresponsible lending and the irresponsible, aggressive marketing of credit.
	Mr Peter Tutton of Citizens Advice has defined irresponsible lending as lending when the lender has not properly ensured that his credit products are affordable and suitable for the needs of the borrower. He has pointed out that many households have multiple loans, and often multiple credit cards, from the same institution. They often use the same products, but somehow the information which those institutions must undoubtedly have about the borrower's other debts with them is ignored. Mortgages offered at a discounted rate are popular with borrowers, but after the initial or apparent joy of 12 or 18 months of low rates borrowers suddenly have to move to a higher rate. I would therefore suggest a slightly more sophisticated version of Mr Tutton's definition of irresponsible lending, because it seems to me that lenders are irresponsible if they do not make sure that borrowers can go on affording loans across the foreseeable life of the mortgage in the kind of case that I have just mentioned.
	I am glad that significant steps are being taken to reduce irresponsible lending. I do not think that other speakers have mentioned those steps so far, but we in the House of Lords, as part of Parliament, did our bit during the passage of the Consumer Credit Act 2006. That legislation gives the Office of Fair Trading the power to take into account the practices and procedures of an applicant for a consumer credit licence in determining whether the applicant should have one, and to consider whether the applicant has engaged in aggressive, "unfair or improper" practices. Those are statutory words, but the Act—I stress this because of some initial points made by my noble friend Lord Anderson of Swansea, who is not in his place at the moment—makes the specific point that "unfair or improper" practices include irresponsible lending. Concern in the Office of Fair Trading—which has the power to grant, refuse or revoke a licence—about any of those matters can lead to requirements being imposed on a licence, with appropriate sanctions if they are not followed.
	Those powers are all fairly new and have not yet been brought fully into effect. In my day as head of the Office of Fair Trading we did not have these stronger flexible powers. The possibility of intervening in a more proportionate and targeted way is much more effective than when the only option was the nuclear one of taking away a licence entirely from a quite important body, such as a bank or whatever, or not at all. The more flexible approach that is now available under the law will be highly useful. Credit, used sensibly and wisely, has been, and can be, a significant boon for many, but debt can be the worst poverty.

Lord Griffiths of Fforestfach: My Lords, it is a great pleasure to thank the most reverend Primate for drawing our attention to this subject today, and for making such a powerful and constructive opening speech which covered so many areas.
	It is also a great pleasure to follow the noble Lord, Lord Borrie. I very much agree with him that the subject of today's debate is both timely and timeless and one of the most pressing social and economic problems we face. This struck me a few years ago when I was asked by the then shadow Chancellor of the Exchequer, Oliver Letwin, to head a commission looking at personal debt in our society and, in particular, at its impact on low-income families. It was not just—as the Daily Mail would frequently put in its headlines—that we were coming up to debt in the country being more than £1 trillion for households, but I was really struck by one statistic. In the mid-1970s, household debt was around 40 per cent of household income; by the early 1990s, it had reached around 100 per cent; by last year, it was up to 180 per cent. So the scale of problem is enormous. The commission estimated on the basis of survey evidence three years ago that roughly 3 million people, adults and children, found debt a serious problem and that up to 12 million people struggled from time to time in making repayments. There was also an enormous amount of denial about the problem. My instinct—it is hard to produce categorical evidence for this—is that the examples given to us by debt advice agencies such as Citizens Advice are but the tip of an iceberg.
	The noble Baroness, Lady O'Cathain, drew our attention to the fact that at the same time as the debt-to-income ratio has increased, the savings ratio has fallen from roughly 12 per cent to 3 or 4 per cent, so that people have less of a buffer than they had in the past. Therefore they are vulnerable to shocks and uncertainties, such as the increasing cost of food and petrol and the increase in mortgage rates. The noble Lord, Lord Haskel, made an excellent point in distinguishing between people who rent accommodation and those who own it. Those who rent accommodation have not had the increase in house prices or the resulting increase in wealth in the past few decades, so they are even more vulnerable because of their exposure to debt.
	In the commission which I mentioned we met many people who personally had struggled with debt and many who worked for or ran debt advice agencies. Three points emerged in particular. First, the problem of debt affects people at all income levels but, as the most reverend Primate pointed out, disproportionately affects low-income families, single-parent families and students. Secondly, we were impressed by the fact that many people did not deliberately decide to borrow absolutely to the hilt, come what may. They borrowed substantially but then found that they were in difficulties because they were made redundant or there was a breakdown in a relationship, the unexpected birth of a child, a loss of overtime or long-term sick leave. As many speakers have said, we found that money problems were a major cause of stress and depression, that there were knock-on effects on children and the anxiety and stress created by debt was made worse by creditors knocking on the door constantly and phoning people at work.
	So debt is a serious problem, especially for low-income families. At the same time, however—and the noble Lord, Lord Borrie, hinted at this—most people who have mortgages in this country say that they can service them without it being a serious problem. I would not wish to criticise the liberalisation of both consumer credit and the mortgage market since the early 1970s, because in the 1950s and 1960s access to credit was very much a middle-class phenomenon. Many working class families found it extremely difficult to borrow. Now we have an exceedingly competitive retail financial services industry which is highly innovative and has enabled ordinary people to improve their homes and move into better homes, to help out their children and invest for themselves and in education. In my judgment, that is a real improvement.
	I am very sympathetic to this Motion and to what the most reverend Primate said. However, I take issue with one thing—the expression "economic inequality". The noble Baroness, Lady Sharp, who is not in her place at the moment, made a very powerful speech on the subject. Economic equality is an extremely important issue, which raises all sorts of moral conundrums. It is very complex; it is not just a British phenomenon but has occurred in most developed countries in the past decade or so. In addition, it has also increased considerably in China and India. It is linked to globalisation but not in a way that is very easy to set out and understand. The moral conundrum is that in China, because of its rapid growth, 200 million to 300 million people have been taken out of poverty. The inequality that we see in this country and in America partly reflects the development of financial markets and so on which has enabled that to take place. A debate on that subject in its own right is important.
	In addition, national Governments have found it very difficult to reduce inequality easily. In this country, judged by the most commonly used definition of inequality, the Gini coefficient, the inequality and distribution of income today is a little higher than it was when Mrs Thatcher left office. It is not that the Government have been unconcerned about the issue in the past 10 years, but it is difficult to do something about it. If the phrase "economic inequality" in the Motion refers to the problems faced by low-income families, then I would very much agree with it. Independently of that, however, I would find the phrase more difficult.
	What can be done? We can do a number of things, and the most reverend Primate was very positive about this. The first is advice and help. Surely the Church of England's initiative, A Matter of Life and Debt, is to be applauded, as mentioned by the right reverend Prelate the Bishop of Newcastle. I am not one who would usually stand up and advocate more government spending, but the Government have been generous with respect to debt advice agencies and have taken on their responsibilities in this area. However, in view of the severity of the problem I wonder whether the Government could not do a little more especially for small and local debt advice agencies that use local people who know local circumstances, rather than putting all the money into something like the citizens advice bureau, as great as its work is.
	The second point has not yet been mentioned but it strikes me as valuable. Some of the utilities in this country—gas, electricity, water and so on—have developed systems of customer management to prevent their customers getting into arrears. If they are in arrears, they help them get out of it. The spread of best practice in that area is desirable.
	The third issue is the lending practices of retail financial institutions. I very much agree with what the noble Lords, Lord Anderson and Lord Borrie, said about this issue. Some of the blame for excessive borrowing must be firmly placed at the door of retail banks, building societies and credit card companies. They are open to a charge of over-aggressive and misleading marketing and lack of transparency in charges. The impersonal nature of the banking relationship that has developed has not enabled them to take due care in lending. The amount of debt written off by the banks totals nearly £7 billion.
	The problem is how to strengthen protection for borrowers while allowing banks to compete and innovate. The most relevant Primate made one proposal with which I disagree—to cap interest rates. I believe that capping rates would reduce the supply of credit to low-income families, drive borrowers into the hands of predatory illegal money lenders and create an incentive for lenders to devise ways of circumventing the ceiling. It would in fact hurt the most vulnerable in society: the unbanked, the credit impaired, vulnerable low-income families—precisely the people it is trying to help. As the experience of illegal borrowing and illegal lending in France and Germany and attempts in various US states to impose caps show, the imposition of such caps has had a perverse effect. What can be done about doorstep lending? The issue here is that one company has about 50 per cent of the market, and four of the companies have 70 per cent. Such statistics in any other market would indicate that more competition is what is really needed.
	I very much agree with what the noble Lord, Lord Watson, said about financial institutions. Our voluntary Banking Code is not nearly strong enough to deal with this highly competitive and innovative industry. One therefore reluctantly feels that there should be a statutory bank customers' charter setting out greater transparency for all charges, standards for marketing and compulsory data sharing.
	Finally, I am delighted that the most reverend Primate concluded his remarks by talking about credit unions. I have asked myself why it is that in countries such as Ireland, Australia, the US and in the Caribbean credit unions play a very important role, especially in lending to low-income families, whereas they do not here. It seems to me that they have failed to achieve their potential here for a number of reasons but they have been far too restricted. The problem is how to get them, or any community finance initiative, up to scale. Again, this comes back to the Minister. I doubt whether we shall ever see credit unions and community finance initiatives getting up to the right scale unless the Treasury is prepared to inject capital as an experimental model to ensure that can be done.

Lord Best: My Lords, I, too, thank the most reverend Primate the Archbishop of Canterbury for initiating this important debate. I should like to take forward the theme of problems with debt, focusing on debt associated with home ownership, and the consequences for poorer households and society at large.
	We know that problems with mortgage debt in the so-called sub-prime, or very risky, market have brought down major American banks such as Bear Stearns in recent weeks. Unwise lending has not only left families without the home they had bought, and often with personal catastrophes to face, but has impacted on the whole economy of the western world.
	I want to look at the position here in the UK and consider what action might now be taken to ease the precarious plight of those on the very lowest rungs of the home ownership ladder. I shall draw on the work of the Joseph Rowntree Foundation, of which I had the honour to be the chief executive from the late 1980s to the beginning of last year. I thank the noble Baronesses, Lady Sharp of Guildford and Lady Greengross, and the right reverend Prelate the Bishop of Newcastle for their references to Rowntree's work on poverty and inequalities. We at the foundation were shocked by the consequences of the huge rise in mortgage repossessions in the early 1990s and the foundation has worked on ways to prevent a recurrence of this phenomenon. I pay tribute to Professors Janet Ford, Mark Stephens and Steve Wilcox, all at York University, who have done important work in this field over the past decade.
	When house prices fell and then stagnated in the early 1990s while worklessness rose, banks and building societies found themselves taking possession of the homes of more than 200,000 households in the three years, 1991, 1992 and 1993. It is worth pausing to consider the human aspects of what can appear a dull economic statistic. Becoming an owner-occupier brings with it freedom from the restrictions of renting, pride of ownership—sometimes the purchasers are the first in their family to have made this transition, making their parents proud too—and the prospect of greater financial security in the long run. But if it becomes impossible to keep up the mortgage repayments and the home is lost, the fall is a hard and painful one. It brings shame and a sense of failure. The household may now be officially homeless and, if children are involved, the local authority has a duty to find somewhere for the young family to go. Because decent social housing is a hugely scarce resource in the UK, as we all know, the only vacancies likely to emerge quickly are those on the very least desirable estates where, regrettably, the system has concentrated those with the greatest social problems. For many the first stop will be temporary rented accommodation—thankfully that is seldom, today, in those dreadful bed-and-breakfast hotels following important efforts by local authorities to reduce their dependency on these places—now usually managed by a housing association. But here there will be the knowledge that the family must move again soon.
	In London, where shortages are most acute, a temporary home may well be in a different London borough. The family must adapt to a new life, with new schools for the children, but only on a temporary footing before a secure council flat or housing association home is available, which will probably be many miles away, occasioning another change of schools. Children's education, and perhaps their sense of security and self-esteem, can be badly affected by those moves and by the pressures felt by their parents. Each of the many thousands of those cases is likely to be a story of human tragedy. The cost to the public purse of a rise in homelessness is enormous. Temporary housing, even in the least prestigious London boroughs, can cost £400 a week. Work incentives are much reduced by huge rents, since any increase in income leads to a reduction in housing benefit, effectively creating a total tax burden of around 90 per cent for those affected.
	In other words, the mortgage repossession figures are alerting society to a catalogue of woes for individuals and families and to dire consequences for wider society. Last year, mortgage repossessions were running at about 1,000 a fortnight, which is a terrible figure but is far less than some 15 years ago. The prediction from the Council of Mortgage Lenders is that the current levels of repossession will rise to about 45,000 for the year ahead, which is nearly 1,000 a week. However, the CML figures relate only to first mortgages. The figures from the courts, published this month in the excellent magazine Roof, show a rise in repossessions of another 20 per cent for other unpaid debt secured on property. Moreover, the real fear is that the position will get a lot worse. There are 1.4 million households coming off short-term, special fixed-rate mortgage deals and now facing higher payments at a time of economic uncertainty.
	There are some deeper anxieties about mortgage debt lurking beneath the surface. Over the past 10 years, interest rates have been much lower than in times past; remember they hit 15 per cent in the early 1990s. The UK has also enjoyed an era of high employment. The extra money available from purchasers has not led to big increases in house building, let alone to bigger and better homes for all. Rather, supply has stagnated while demand has increased, and the number of homes built by house builders and housing associations has fallen far behind the number of extra households each year. The result has been that the extra money has simply gone into inflating house prices. The real danger now is that if house prices begin to fall significantly, those with mortgage debt that becomes greater than the value of their home—in other words those who face so-called negative equity—will see their repossessions increasing further.
	As the noble Lord, Lord Watson of Invergowrie, noted, costs have been rising. If incomes fall in real terms, particularly if there are job losses that follow a downturn in the national and international economy, negative equity will close off the option of trading down or selling and moving on. If you owe, say, £150,000, but the flat that you bought is now worth only £120,000, you cannot sell and get on with your life, because you cannot repay your debt. Mortgage repossession is likely to follow. That phenomenon in turn compounds the wider public's loss of confidence in the housing market, and prices slump further.
	What is to be done to ease the flow if not prevent the rise in homelessness and human misery that now threatens? Yes, the Chancellor must be right to inject extra liquidity and confidence into the lending market and, yes, lenders must act with forbearance towards those trapped in currently untenable ownership. The wonderful work done by citizens advice bureaux and money advice services must get our support to help people through the troubled times ahead. Other steps are going to be necessary. First, I suggest that the Government must allow the income support for mortgage interest scheme to revert to the position of supporting people after just two months, instead of—following reforms in 1995—there being a period of nine months before that support kicks in. As an emergency measure, that will be necessary to stave off homelessness following a big rise in repossessions. Remember that if you are a tenant who runs into difficulties, you will get housing benefit. That now costs us some £15 billion a year. But in a very similar household, a home owner cannot expect help of that kind; they can expect no help at all for nine months, which is too long to expect the lenders to hold back before moving to the courts and to possession orders. That is the first measure that is necessary immediately to add to the safety net that has become so thin for those who find themselves in difficulties.
	Secondly, for the long term, we need a protection scheme that provides real insurance to people who face these difficulties. The Joseph Rowntree Foundation's work has led to the concept of a sustainable home ownership partnership through which the borrower pays half the cost of this insurance scheme, the state pays a quarter and the lender pays a final quarter. If that was to be a compulsory and universal scheme, the huge economies of scale covering all home owners would mean that it could absorb the ISMI, the current income support for mortgage interest protection, at very little extra cost, if any, to government. The scheme could provide help, not just after nine months, but after two months, cover more categories of mortgage failure and see tens of thousands of householders through a very difficult period in their lives.
	The present private sector arrangements for mortgage payment protection insurance policies have proved to be such poor value, they have fallen into disrepute, with take-up for existing occupiers and those moving into new properties at only 18 per cent. That is a dramatic decline in people taking out such insurance and leaves them much more vulnerable than in times past. I am suggesting that there is a serious position out there, that mortgage repossessions are likely to rise dramatically and that the safety nets that are in place are totally inadequate to the task that confronts us. I commend the emergency measure of restoring the ISMI protection scheme to help after just two months, asking lenders to forbear only for those two months before support kicks in, and I commend the excellent arrangements that the Joseph Rowntree Foundation is wisely putting forward for a scheme of sustainable home ownership partnership protection.

Lord Desai: My Lords, as is everyone else, I am grateful to the most reverend Primate for initiating this debate, and, as my noble friend Lord Haskel and the noble Lord, Lord Patten, reminded us, a similar debate was introduced last month by the noble and right reverend Lord Harries. At that time, I spoke mainly on poverty and did not speak very much on inequality. I want to address both those issues today.
	I start with the excellent speech of the noble Lord, Lord Best, because he made recommendations of extreme importance, and I want to add one more—which I thought of all by myself, but which I have not yet publicised very much. I begin with the notion that home ownership is a fallacy. Financial education must tell people that they do not actually own their home—the mortgage lender does. They have obtained the mortgage from the lender on an arrangement to pay interest. Only very late in the mortgage will they start paying back the principal value of the house. That is one of the realities of mortgages. Therefore, they may think that they own their homes—and the wealth statistics may say that they do—but they never do.
	When repossession time comes to a person like that, there should be another choice in addition to those that have been available—to make a new contract in which the person agrees to give up the current negative equity, and possibly the future positive equity, and convert their mortgage payments into rent. That is not easy to do. I think that it would require some public sector intervention. I shall follow my friend the noble Lord, Lord Griffiths, in increasing government spending by leaps and bounds as I speak; he has set an example, so I am covered. It would have to be done by the local authority because, as the noble Lord, Lord Best, pointed out, repossession has other costs, such as moving the family away. The local authority could take over the unpaid mortgage, give a new contract to the possessor and make the family tenants, who would pay a roughly similar flow of payments albeit now converted into rent. There would be no repossession, but no possession either, unless perhaps five or 10 years into the future the family were able to catch up with the payments; if not, they would become permanent tenants and the local authority would end up owning the house. That is not very complicated and it would not cost much money—I worked it out.
	The biggest flaw in our housing market is the lack of a decent renting sector. We have willingly destroyed both the public and private renting sectors. We must restore a decent renting sector in the middle—neither for housing benefit claimants nor for the visiting non-doms. My proposal might slowly create a proper renting market and at the same time lessen misery for many people. I shall pass my idea on. I am sure that I shall be summoned to the offices of my noble friend to explain myself, as has happened with some frequency lately.
	This is a debate along Christian principles—as my noble friend Lord Borrie said, it is a timely and timeless debate—so let me say a word in defence of moneylenders. No one speaks up for sinners, so why shouldn't I? The throwing out of the moneylenders from the temple was based on a misunderstanding about what the moneylenders were doing there. They were simply performing a foreign exchange function. The temple would not accept offerings in foreign currency, so the moneylenders were there to change the currencies of the people of Judaea, Samaria and wherever else and convert them into coins that the temple would accept. By throwing out the moneylenders, the young radical Palestinian inconvenienced quite a lot of devoted people and ruined the temple's finances, although only temporarily, I am glad to say.
	People misunderstand moneylenders. People think that lenders cause misery just by being there. However, particularly for poor families, access to reasonable lending is not available because those people are a very poor risk. Economists have studied this problem in great deal. Once upon a time in this country, we had pawnbrokers, who were a kind of moneylenders; they lent against household goods. Poor families in the East End regularly—practically every weekend—resorted to moneylenders. Because of the financial liberalisation and the greater competition initiated by the noble Lord, Lord Griffiths, in his early 1980s avatar, pawnbrokers have disappeared and credit cards have taken their place. Unfortunately, credit card companies do not accept your best suit and give you money against it, even if you are willing to retrieve it, so we are now drawn into a purely financial calculation.
	I agree with my friend the noble Lord, Lord Griffiths of Fforestfach, that capping interest ceilings will do the worst damage to the poorest people. I am sorry about that, but it is obvious. New ways will be found to lend money. People often say that usury should be banned and that we should move to an Islamic method of banking or something of that kind, but that would only rename interest as something else. People would still borrow money but what they pay would not be called "interest", and I do not think that we would gain much from that. Therefore, as my noble friend Lord Borrie said, the most important things are transparency, good regulations related to punishing irresponsible lenders and ensuring that, if people are distressed, we can help them.
	In that regard, I should like to make a point concerning the financial institutions, which lately have been so expert at losing a lot of money. If a fraction of that money could be given to citizens advice bureaux, that would greatly improve the funding of financial advice. I say to the noble Lord, Lord Griffiths, that the odd £10 million to £20 million—an amount that would not even be noticed by Goldman Sachs, which had been defrauded by a secretary—would not go amiss for the citizens advice bureaux. As he is in the mood for spending government money, I am in the mood for spending his money.
	Lastly, I move on to the important subject of poverty. The recent controversies about the 10p tax rate and so on have shown that tax cuts are not a good device for dealing with poverty, but thresholds are. The current problem has been tackled and I congratulate the Government on that, but there is an important point that I hope they will think about in the future. If we were able to raise the threshold below which no tax is paid, that would do an immense amount to relieve poverty. As I am not the Minister in charge and as no one takes me very seriously, perhaps I may make a quite radical proposal.
	The poverty level is defined at 60 per cent of median income, and the median income is roughly £350 per week. Sixty per cent of that amounts to double the current threshold—going from roughly £5,500 to £11,000 per annum. If there were a threshold of £11,000 below which people did not pay tax, then all low-paid people would be taken out of the tax net. Indeed, some people who come slightly above the lower level of the 20 per cent income tax rate would also get some relief. If I were asked how I would pay for it, my answer would be that I would remove the ceiling on national insurance contributions. That would give you all the money you needed. Again, if I am called by my noble friend, I shall, if necessary, explain myself. The important point is that, if you are to tackle poverty, you will do so only by taking people out of the tax net.
	Another important point is that things such as the married couple's allowance do not help people who are not in the tax net. A radical idea put forward by Milton Friedman several years ago concerning negative income tax was basically that everyone should be given the same benefit in cash terms, whether or not they pay tax. A number of noble Lords have pointed out how our current benefits system destroys marriages. It is very simple: two people living together on income support do not get twice as much as a single person. Therefore, the state has subsidised the break-up of marriage. Even when the Conservatives were in power, much as they believe in marriage, they did not change this law. It is very simple to pay the married couple's allowance because we think only about taxpayers. Those who do not pay tax or those who are really poor do not benefit from the generosity of the state. If we were to pay people in cash terms for being together—either in cash or as a tax deduction—that would immensely improve the economics of families staying together. If the economics are not right, nothing will put them right, regardless of how many sermons they listen to. The economics of income support are such that families are being destroyed and have been destroyed for the past 30 years.
	Therefore, it is up to us not so much to redefine marriage or partnerships, as the noble Lord, Lord Patten, suggested, but to improve the way in which we compensate people for living together. Right now, there is a tax on people living together, whether married or not, as long as one is below the tax threshold. It is very important that that is changed and that we move to a system in which people are compensated for being citizens. Poverty has increased very sharply in the past 20 years, and although it has come down a little, much more needs to be done. If we could make these very simple, almost frugal moves, we will be able to reduce poverty and thereby improve the prospects for families.

Lord Griffiths of Burry Port: My Lords, I want to add my voice to others who have expressed gratitude to the most reverend Primate the Archbishop of Canterbury for bringing this subject before us with some urgency, as he does with so many others that we need to face. It gives us a chance to air our views and do some thinking.
	It is a tricky business following my noble friend Lord Desai at any time, but in a debate in which he has so liberally used the words "Lord Griffiths", I want to make it very clear that the odd £10 million or £20 million is not mine to dispose of anywhere, in this debate or beyond these premises. I am also grateful to him for having given us not just a lesson in economics, with some interesting and angular thinking, but also a lesson in theology, which I promise him I shall do my very best to consider in some depth.
	It is at the level of his theological point that I begin my contribution. He wanted us to be more understanding of lenders. He instanced pawnbrokers in traditional communities who served such a useful purpose. Earlier the noble Baroness, the Lady O'Cathain, adduced the fact that she was not personally acquainted with some of the problems that we are talking about. Therefore, perhaps I might be allowed to say that I am desperately acquainted with them. Mine was a one-parent family with two children, a single room, carbolic soap, free meals at school, a beneficiary of the National Assistance Board and so on. Yet, at the same time, without wanting to bring out a violin or a handkerchief, we had a man who came our way, week after week, to take a penny or, eventually, sixpence off my mother for an insurance policy that she took out; a pawnbroker down the road; and a person in the shop who seemed to have a never-ending slate on which my mother could buy her household goods and groceries, never reclaiming the money at interest—just at cost. Somehow when the modalities that shaped the lives of even the poorest of the poor—I think we probably were that—are local, there is a dimension to the need to solve the problem that makes it all manageable.
	That is why I am very much drawn to the most noble Primate, the most noble reverend, and all the titles that go with Canterbury—perhaps the easiest title for me to use is the honorary member of the credit union group in Canterbury—and to the idea of attempting to solve these problems as locally as possible. Human constraints and the breathing nature of addressing those problems make things altogether quite different. A fantastic array of statistics, experience, policy and philosophy have been paraded and rehearsed in this debate. I cannot possibly claim to climb those heights. However, it has been such a pleasure for me to belong to a party that, in the past 10 years, has tried so hard to address poverty. We should recognise working tax credits, the minimum wage—although I am not sure that that is set at the right level any more—child tax credits, the rise in child benefit to £20 a week, 2,900 Sure Start centres, and I could go on with the list. We ought to recognise that, and yet liberal mention has been made of the findings and the work of the Joseph Rowntree Foundation. I shall not rehearse the list of those who have mentioned the latest report.
	I was the president of the Methodist Conference in 1994 and took part in a number of poverty workshops around the country. We were using a Joseph Rowntree report of that time which talked about the differential—the gap—between the wealthy and the poor. We used the report in a particular way, at a particular time in our political history. Here we are all these years later with very much the same kind of material to hand. What has gone wrong? All these initiatives have been taken; all these efforts have been made, yet the gap is the same. I wonder whether we have the possibility within us to look at this thing as a matter of the culture that we have created rather than in terms of treating the symptoms and the victims of the processes that have been let loose. A culture is a far harder thing to address than simply particular episodic moments within a narrative.
	I deal with people daily. They come to my surgery and I deal with their problems one at a time. I have jotted down a few of the stories that I have accumulated recently. I have touched them up a little so that the people involved are anonymous, but they are all real. Asylum seekers who, under the system are not allowed to work or to claim benefits, have children whom they bring them up on almost nothing. I scratch around looking for money to help this one, that one and the other. I see the effect on families of people who are outside the system, having no identity, no involvement and no stake in society.
	I talk to drop-outs from university, mainly from ethnic minority groups. I say, "You are a clever kid. Why haven't you got on?". They tell me again and again, "We don't have time in our kind of society to build a career or plan a future. Everything is much too urgent for that". I ask what are the alternatives to help me to understand them. Without batting an eyelid, more than one has told me that crime pays quickly and drug-dealing pays quickly. If you can get past the front door, music and football bring lots of money, as do fame and celebrity. They are the acknowledged routes—I shall not say for significant numbers, as I cannot possibly offer statistics for my impressions, but that talk is out there on the street.
	Let us consider a lonely young man, alone in his bedsit, who develops an addiction, via his computer, to buying goods that he does not need, making himself indebted to an extraordinary level, and ultimately his whole life collapses. Or what about a bank employee—a young man starting his career who gets his credit cards mixed up? Perhaps people further up the banking chain get their credit cards mixed up too, with much wider consequences. But the young man is sacked when he is found out. The police are brought in; he is sent to a high security prison where I visit him, and his whole life falls apart because he becomes unemployable. It was logistical not criminal; he just got his cards mixed up with each other and dates wrongly identified, leading to prison and losing his job. Meanwhile, someone very high up was given however many millions to be got rid of for running a bank that did not perform very well at all. What are we doing in this world? We are talking about the culture.
	I know people who bust a gut to raise money to see that their children do not have to raise loans and get into debt at university. What do the children do? Even though their costs are paid, they go to the student loan facility and raise a loan anyway because that is the culture they are part of. We have work to do to shape a different culture. Solutions that are as low in the chain as possible are to be recommended, and credit unions are one of those. Certainly we need lots of education to shape a different value system or a greater level of realism about what will happen if you do certain things. So I am very drawn to the solutions put forward by the Archbishop of Canterbury—a title that I can manage without all that other stuff getting in the way.
	I am delighted to take part in this debate and from the ground floor, as it were, to offer my two penn'orth. I am absolutely convinced that the social environment, within which people live their lives and sometimes incur debts, is much more manageable and human for people than all this doorstep lending at punitive interest rates that soon turn people into commodities or victims. Surely none of us wants that.

Lord Sheikh: My Lords, this is a most timely debate and one that will find a resonance across most parts of our country. I congratulate the most reverend Primate the Archbishop of Canterbury on raising the matter and on the typically skilful and reflective way in which he introduced the subject.
	It matters not what period of history we choose to examine, nor even whether we restrict our vision to the human species: the family plays a fundamental role in the life of all social beings. Nature defines that we are much stronger when we are attached and included in strengthened social ties and institutions; we are stronger both individually and collectively. That is why we should value families extremely highly across all sections of our communities.
	Economic inequality is a cause of great soreness and distress in society. A study produced by the Centre for Social Justice last year identified poverty as being driven in part by financial exclusion and debt. We have witnessed a substantial increase in the level of debt across our population. In 1997, the average financial liability, excluding mortgages, was £2,690. In 2006, that figure stood at £5,940. We all recognise that debt tends to affect those with the least the hardest. Those who are among the relatively worse off in our society are the most vulnerable to fluctuations in interest rates.
	Banks and financial institutions have aggravated the problem by making borrowings on loans, mortgages and credit cards far too easy. People have been encouraged to borrow more than they can afford. The present financial crisis should be a lesson for those institutions: they must learn to lend money in more responsible ways from now on. We need better co-ordination of government policy, especially in addressing regulation of bad businesses. The Bank of England and the FSA need to be more vigilant in taking the most suitable action where there is an indication of moral hazard. That is necessary to protect prospective borrowers and their families.
	Total household financial liabilities have increased every year since 1997, from about £586 billion to £1,370 billion in 2006. Expressed as a proportion of households' gross disposable income, that has increased from 105 per cent in 1997 to 164 per cent in 2006. At the end of January this year, total debt in this country stood at £1,412 billion. That figure is alarming. Levels of personal debt in this country are estimated to increase by approximately £1 million every five minutes. A recent report found that children of families that have broken down suffer from mental problems and depression. One factor in family breakdown is financial difficulty.
	We have seen a tremendous increase in the number of home repossessions in recent years. In 2004, 8,200 properties were taken into possession. In 2007, some 27,100 properties were repossessed, according to the Council of Mortgage Lenders. These figures make a mockery of the Government's claims to have helped more people on to the property ladder. The effect of repossession on a family can be catastrophic. When the volume is this high, the effect on wider communities is also quite frightening. The situation will get worse with the credit crunch, which is affecting the country as well as having an adverse effect globally. I hope that the Minister can give the House answers to these problems today. What assessment have the Government made of the likely implications for individuals and families of banks' greater caution in lending money to one another as a consequence of a credit crunch that we have all witnessed?
	This country's inflation, too, is causing great damage to families. Although the Prime Minister claims that inflation is running at about 2.5 per cent, it is now recognised that the cost of living is increasing at a far greater rate. A recent study found that the price of butter has increased by 37 per cent, bread by 28 per cent, flour by 22 per cent, a pint of milk by 17 per cent, cheese by 17 per cent, potatoes by 11 per cent, gas and fuel by 10 per cent, and petrol by 8 per cent. The most recent Budget has been estimated to cost the average family around £110 a year more, and we have seen council tax double since 1997.
	There have been further increases in the price of food, according to figures quoted in the Times on 23 April. We also know that over the past few weeks the price of a barrel of oil has increased to about $115. The problems of scarcity and the high price of food not only affects people in the United Kingdom but is a global problem that requires appropriate action, not only by national governments but by all countries in the world. The engagement of international institutions is required to help to avoid a major catastrophe. Given the rising cost of living and families finding it harder to make ends meet, it is a shame that the Chancellor of the Exchequer has seen it necessary to aggravate the problem by raising taxes in the Budget. Tax rises appear to have been focused on those least able to afford the increases.
	In the limited time available to me, I do not want to get caught up in debating the pros and cons of the 10p tax rate, but increasing taxes, particularly those that hit the most vulnerable the hardest, during a time of impending economic hardship is bad news, socially as well as economically. In view of the pressure applied by parliamentarians, the Government appear to have made concessions to low-paid workers without children and pensioners under the age of 65. The details of these concessions are rather vague at present; it is not clear whether they will entirely redress the problems that affect everyone who will suffer as a result of the abolition of the 10p rate of tax. It appears that we will have to wait until the Pre-Budget Report in the autumn to find out the details of these plans.
	Tackling financial exclusion and economic inequality is a social responsibility. There is a role for others beyond the Government to address these problems. There is a role for civil society, charities, religious bodies, financial institutions and businesses to take joint responsibility and to work together to find and implement solutions. We need to look at the recently published Thoresen review of generic advice and the possibility of implementing its recommendations. Furthermore, people need to be guided on financial matters and we could begin perhaps by giving appropriate guidance in secondary schools. I want to take this opportunity to pay tribute to the work of citizens advice bureaux for their hard work in providing advice to those in difficulties.
	Finally, I shall make a few observations about childcare. The first steps in a child's development are crucial. All parents will recognise the importance of getting the correct balance. I congratulate the think tank Policy Exchange on its report on this issue earlier this week. Research consistently shows that parents prefer informal childcare during the earlier stages of development, which is best for children and, thereby, for the communities concerned. The report proposes the provision of funding to support families rather than institutions, as is favoured under the current system. The report offers a serious contribution to this most important debate on how best we can support the needs of our communities, strengthen our families and address the inequalities that we all dislike. We should give consideration to the recommendations in the report.
	If these proposals do not prove to be affordable, we still have to devise a system that moves away from the "state knows best" principle which drives government policy at the moment. Parents can be trusted to know their families and to do what is best for them, and we would all be much stronger if that were allowed to happen. I hope that the Minister will have something positive to offer in answering this debate.

Lord Dearing: My Lords, I join in the thanks to the most reverend Primate for initiating this debate, which has given us an opportunity for the second time in a month to reflect on major social issues. I also thank all Members of this House who have spoken. It has been a privilege to listen and to learn. The speeches have given the Government an agenda of work for two or three years.
	I noted the comment made by the noble Baroness, Lady O'Cathain, on how, years ago, we all looked to the savings ratio. No one hears of it any more. Another thing was the current account of the balance of payments, which again we do not hear about any more. Without having the opportunity to check my memory, I think that in every one of the past 20 years the current account of the balance of payments has been in deficit—I thank the noble Lord, Lord Desai, for nodding his head in confirmation—and it has been growing. In 2006, it was £50,000 million, which was about 4 per cent of GDP. In the first nine months of 2007, it had already equalled £50,000 million. One gets a touch worried about these things—personal debt—and the implications of continuing for a long time in current account deficit. If there is trouble ahead, those who will suffer most are those with the least; that is, the least capital in the conventional sense, and in terms of skills and educational capital. Those people have the least opportunities to respond to adversity.
	Another comment that stuck me was made by the noble Baroness, Lady Sharp, who gave figures on income. It did not entirely surprise me because there have been sharp differences for a long time, but it brought back memories—reflecting again my age—of a picture in the Picture Post, which I am told has been recently reproduced. It shows ragged-trousered boys looking at some rather smart alecs in their Eton collars. That did not bring to mind disparities in income so much as the deeper issue when looking at how to handle adversity—disparities in the educational capital of those of our people who are at the bottom of the barrel.
	We are heading for serious trouble over those who do not succeed at school. They are increasingly disaffected members of society who do not accept its values. I fear for the quality of our society and the reasons are evident. It is also a major moral issue. Whatever their differences may be, the great faiths all unite in recognising our responsibility one to another, particularly for those in need, and these kids are in need. They are totally disenfranchised from fully engaging in life, and we are told constantly that their job prospects are diminishing by the year. It frightens me.
	I join those who have been suggesting remedies by talking about small, practical things that can be done in education. We should concentrate on those who are not succeeding at the fundamental capacity to read and do simple arithmetic—not the clever stuff, but the absolute fundamentals. We ought to be ready to consider, if parents wish it, allowing children to take a school year again. It is not part of our culture, but it may help a child if they can pause at a certain point. As we have debated on other occasions, those children born in the summer are the most likely to get in trouble, so the option to spend an extra year in nursery education might help.
	The extended school day in schools in areas of severe social deprivation can be a way of enriching children's lives. If children do not have middle class parents who can provide them with all the extras, including coaching if they need it, we must help them in this way. If children are still falling behind at the point of transition from primary to secondary education, that is when we must rescue them. The risk is that they will regress even further on moving from a small community where they are known and cared about, and where the teachers teach children, to a large community where the teachers teach a subject. As they regress, they may sink into disaffection and disregard, leading to wasted lives. In that critical first year at secondary school, we must apply the remedy with special classes, and by that I mean putting the best teachers we have to the task of helping those children read and do basic arithmetic.
	Noble Lords have talked about financial literacy. People should be able to understand what interest is all about, and they should know how to fill in a form, which is a very daunting task for many. Mention has been made in terms of a particular strand of education called citizenship, but I would call it arithmetic. The subject is often boring, but if we can get across to kids the meaning not of percentages but of interest rates and what it costs to borrow money, and what it means when a slick salesman says, "It's only 5 per cent interest", it is interest at 5 per cent a month, not a year, they will respond to that. We should make arithmetic come alive for young people by making it relevant, and that applies to other things as well.
	We also need to change our thinking about educational provision for children aged from 14 to 18. Giving young people the option to take vocational diplomas underpins my argument for special technical colleges for those who are that way inclined in order to give them the best opportunity to achieve. We need to look at long-term solutions.
	I want to acknowledge what the Government have done to relieve poverty through various forms of tax credit, but the fundamental moral and social issues have to be addressed through education. We talk about it and make progress but, just as the Government are committed to achieving the elimination of child poverty by 2020, we must also eliminate the problem of children leaving school unable to function in the basics.
	Let me give a practical illustration of how this disadvantage affects a life. I recognise the good that the Government seek to do through tax credits to help the poor, including, in particular, the working poor. It is not something I have had to deal with for myself, but I have taken an interest for one of my family and have come across what is involved. I am speaking now not of my family but of the 20 per cent of people who have left school functionally illiterate or innumerate. The form for claiming tax credits is 12 pages long and, if you have a large family, there are an extra four pages to fill in. The relevant department is very helpful. It will assist you in filling in the form and send you a publication entitled How to complete your tax credits claim form. This publicationcontains 59 pages. No wonder there are problems over this.
	In the debate on the Budget, I think it was Mr Cousins—I am not sure—who referred to the scale of people not claiming because they were frightened of getting into debt as a result. I think, again from memory—I may be wrong—that Mr Frank Field referred to more than £1 billion not being claimed. People are frightened of the form being wrongly filled in and getting them into debt.
	Those examples are based on imperfect memory but I have some legible notes from which I can be more secure on the facts. In January, a body concerned with public policy produced a report on tax credits. It stated that while it expects overpayments to be far fewer in the future, up to 2006,
	"overpayments were made in one third of all awards".
	It further stated:
	"A recent survey of tax credit recipients found that almost half"—
	the exact figure was 49 per cent—
	"were either less likely or definitely not going to make a claim in the future due to their experience of overpayments".
	It goes on to report:
	"The Government has only retrieved a third of all overpaid money, with nearly £4 billion still outstanding".
	These figures affect people who do not have very much. I know the department seeks to be, and is, very helpful over the phone and over arrangements to recover, but people are frightened of a system which, although it was conceived for the best of reasons and has done much good, is too complicated for those who have left school functionally illiterate or innumerate. It is all right for the Dearing Civil Service claque, who are quite good at reading notes, reading forms and filling them in, especially if they have regular incomes, but if you are a casual worker on a building site who cannot read and cannot do numbers and your income is irregular, you have reason to be frightened. Someone I know—this may be very rare, but it is a fact—in the course of seven weeks received six of these forms giving different statements of what they were entitled to and what they owed. Can you imagine what that would be like for people who cannot read or write very well? The Institute for Public Policy Research would say that this is a good thing to have, but we need to think again about it.
	I mention that not because I am particularly concerned with tax credits, but to stress the importance of enabling our young people to leave school functionally literate and numerate. But what about the 5 million people who have left school and cannot read? As for the kids at school, we can get at them whether they like it or not. But the people who have left school, blow me, do not want any more of it. How are we going to get them back? The Government are doing the right thing. You can have education up to level 2 for free, but that will not get them back. They are scared stiff of it. We must think through how to bring them in.
	I happened to reread a bit of Adam Smith—I think that he is 250 years out of date—and I listened to what the noble Lord, Lord Sheikh, said about taxation. In The Wealth of Nations, Adam Smith says that there is nothing a Government learn more quickly than how to extract money from people's pockets. More profoundly, he talks about self-interest and motivation. We must motivate such people to want to learn and providers to want to teach them.
	The Government have created one fine institution, giving it to them on a plate if they have a computer at home, called "learndirect". Each year, some 30,000 people, without qualifications, are taking advantage of that. We want it to be 60,000, but it provides one approach. The University of Sunderland has recognised the problem and said, "We must get into the housing estates. Let's take a shop in the MetroCentre and approach the people that way". The FE colleges are great, but the way we remunerate them should provide them with an incentive to go for those without any qualifications, not level 1, who are the most costly and difficult to teach. We need a funding system that does that.
	I said that I would offer a few humble and practical suggestions. I apologise for going on so long, but this issue is so important to the quality of our whole civilisation, and we have so much at stake, that we must respond to this need.

Lord Newby: My Lords, I, too, congratulate the most reverend Primate on initiating the debate. He spoke most movingly about poverty in the UK today and I entirely agree about the importance of the issues he raised. I do not intend to repeat the arguments I made in the debate introduced by the noble and right reverend Lord, Lord Harries, a few weeks ago about the importance of a redistributive tax system. However, it is extraordinary that, from this month, an individual with an income over the tax threshold of £5,435, will be paying a tax rate of 31 per cent—21 per cent income tax and 11 per cent national insurance—whereas someone selling a second home, or any asset, pays only 18 per cent. In terms of fairness, that makes no sense.
	It is probably not the time today to dwell on the Prime Minister's package to mitigate the effects of the abolition of the 10p tax rate. I am sure that the Minister will not want me to do so. However, I want to make two points in commenting on what I believe is a most disreputable exercise. First, the Prime Minister is promising to increase tax credits to those without children, yet the take-up of tax credits by those without children is currently 22 per cent. So unless the Government plan some dramatic initiative, of which there is no sign, this much trumpeted change will not benefit the vast bulk of people to whom it is targeted.
	Secondly, to ensure that all people on the minimum wage will not lose out from the removal of the 10p tax rate, that wage would have to be increased to £18,500 a year from the current rate of £10,764. Does anyone believe that that is either possible or desirable? Does anyone believe that it is right to expect employers, in order to deal with a Labour Party Back-Bench rebellion, to pay a significantly higher minimum wage that has no relation to the basic underlying economic arguments for a particular level of minimum wage? We will return to these matters, but politics has had a bad week.
	Much of today's debate has been about indebtedness. A common theme has been the intense pressures, particularly on parents, to follow a norm of consumption, whatever the level of their income and whether or not they can afford it.
	The most reverend Primate talked about the stigma attached to unsecured debt. Stigma may be attached to it by some, but there is no doubt that there is a lot less now than there was in my parents' generation. The noble Baroness, Lady O'Cathain, mentioned the old adage that, if you want it, you have to save for it. There is little evidence that today's generation accepts that as a basis for its decision-making. That is perhaps not surprising, because reputable institutions such as Northern Rock have until recently said that it is perfectly all right to borrow up to 125 per cent of the value of a house—this was to be applauded. For reasons which we understand but may not agree with, the Government are encouraging children, often from poor homes, to take out loans to go university, which means, as the noble Baroness, Lady Sharp, pointed out, that they will end up at the age of 21 with average debts of £20,000. So all the pressures of society, far from being against people taking out debt as they were a generation ago, are now towards it, and the message coming from both government and respected financial institutions is that debt is not just acceptable but to a certain extent creditable—no pun intended. However much we might wish that it were not the case, we have to accept that this is the situation in contemporary Britain, as many now do.
	As the noble Lord, Lord Borrie, pointed out, there are two sides to indebtedness: irresponsible lending and imprudent borrowing. I join to a large extent the defence of the moneylenders. We need systems under which people can borrow. Anybody who has ever had a mortgage is by definition a supporter of the moneylenders to a certain extent. As people have pointed out, there is a long tradition of the door-to-door selling of credit to the poor. Levels of interest are sometimes reasonable, but very often high, because the risk is high and because some people are simply sharks. Dealing with it is extremely difficult, but I agree with the most reverend Primate that it is important that individuals at the very least have a better understanding of the product that they are buying, whether it is on the doorstep or anywhere else.
	One proposal of which I have been supportive for a number of years is to require sellers of financial services to provide on a single side of A4 paper all the relevant features of their product. If I go into a chemist and buy some aspirin, a little piece of paper comes out of the box. I do not normally bother to read it, but I know that huge effort has been put into explaining the drug's salient features and what it might do to me in certain circumstances. It does not often bear reading, but a heck of a lot of effort has been required of the drug companies to explain their product. No such requirement of the financial services sector exists. It is required to produce huge reams of material about its products, but it is done in a largely meaningless way. It is not required, as it should be, to do it in a way that individuals on the doorstep or anywhere else can understand. That is a perfectly possible and desirable change.
	I strongly agree with the most reverend Primate about the importance of credit unions, although my experience of watching my wife attempt to establish one in Lambeth persuades me that, unless the rules are changed significantly, credit unions will not expand in the manner that many of us would wish. It is extremely difficult to do it, even with a group of highly motivated people. I strongly agree with the noble Lord, Lord Griffiths, that if you really want credit unions to play a big rather than a marginal part in the financial system in this country, the Treasury and the state will have to get involved in the regulatory framework and the financing to ensure that that happens.
	If doorstep selling of credit has a long history, we are now faced with a number of new methods of selling credit, which between them contribute significantly to, or represent, irresponsible lending. I have three examples. First, there is advertising on daytime television by companies such as Ocean Finance which implies that, if people in debt transfer their debt to them, not only will their debt problems be solved but they will enter a nirvana of prosperity. Such ads are shown on children's television, as well, so that children go to their parents and say, "Look, you could have all this, too—you could be hauled out of the ocean and be put on a yacht with the champagne and glamour". These ads, in my view, are deeply misleading. I wonder what the Advertising Standards Authority would have to say if they were referred to it. Perhaps that is something that I should do.
	Secondly, there is the irresponsible offering of credit cards. All of us have had an avalanche of offers through our letterboxes to take out credit cards. I understand that for some banks at least half the credit card applications that they receive as a result of this exercise are turned down at first sight because there is a prima facie risk attached to the applicant. However, that is not very good for business—so they are reviewed. I am told on good authority that of that 50 per cent that are turned down at first looking, some 80 per cent or 90 per cent are subsequently endorsed. A significant proportion of credit cards are issued knowingly by the bank to a purchaser with some kind of credit risk. This is deeply irresponsible.
	Finally, as a kind of wrinkle on that, store cards are issued by people who have no qualifications to offer them. I heard earlier today of the case of a housewife who was not working, who went to a shop that had store cards and was told that she could have one and get the benefit but that she could not put "housewife" or "not working" on the form for the store card. The assistant said, "I'll put part-time worker". That is another practice encouraging irresponsible borrowing.
	What to do? First, there is a systemic irresponsibility in how the financial services sector sells its products. We have had a couple of suggestions today, both of which need to be actively pursued. The noble Lord, Lord Borrie, talked about the OFT's powers, which he described as proportionate and targeted—so I would like them in a proportionate and targeted manner to hit some of these practices. The noble Lord, Lord Griffiths, referred to the need for a statutory code. I am always anxious about having more statutory anything in this area; firm statutory provision in the case of the FSA did not in itself stop Northern Rock. However, there needs to be concerted action in this area.
	We have these examples of irresponsible lending, but what about imprudent borrowing? The starting point must be to improve the level of financial literacy. Other noble Lords have talked about this. The figure that is always in my mind, which I have used before—so I apologise for repeating myself—comes from the head of the Learning and Skills Council in Yorkshire and Humber a couple of years ago, who said that a survey it had done in the area showed that 27 per cent of adults in that region said that they were unable to use the Yellow Pages effectively. This gives us some idea of the scale of the problem.
	The starting point has to be with the educational system and children. I believe that financial education has been incorporated into the national curriculum this year, but I am concerned that the plans do not go far enough and that not enough priority will be given to it. There need to be lessons in budgeting and money management to help young people avoid debt. These lessons should not be part mainly of a formal qualification-based curriculum. This is learning for life, not learning to pass an examination. To help the resourcing of this, existing schemes that a number of banks have to send their managers into schools to give advice to young people should be extended. The Government should pressurise the banks to do more of that. Bank managers have more credibility to talk about money than most teachers.
	I also agree very strongly with the points made by the right reverend Prelate the Bishop of Newcastle and the noble Lord, Lord Dearing, about the problems of children who go through school, as it were, Teflon-coated against learning and who come out without the necessary skills and qualifications. Perhaps we will return to that matter another day.
	The final area I wish briefly to consider is how to provide adequate advice for adults who get into difficulty and who are desperate for some kind of impartial advice. That is why the Thoreson report, referred to by the noble Lord, Lord Sheikh, about generic financial advice is so important. However, the Thoreson review proposes that the FSA should be responsible for giving such advice, which seems to me to be most misplaced. To suggest at this point giving the FSA any new responsibilities seems barmy, but to suggest that it has the capacity and competence to manage a generic financial advice service is particularly misguided. It is too closely linked to the financial services industry in the public mind, and its staff simply do not have the experience of the chaotic lifestyle of many of those who need advice on their financial affairs to provide the kind of sympathetic approach needed. The citizens advice bureaux should be given prime responsibility for managing this service. They are the most trusted brand for doing so. They understand the benefit system and, adequately resourced, could do an extremely good job.
	Today's debate has highlighted major problems facing many millions of people in Britain. Parliament on its own cannot resolve them, but we play a crucial role in setting the regulatory policy framework. A number of specific policy initiatives have been proposed today, and we must ensure that we do not lose sight of them over the coming months.

Baroness Noakes: My Lords, it is a pleasure to take part in the debate initiated by the most reverend Primate the Archbishop of Canterbury. He has made a powerful case for the pressures on families caused by economic inequality and debt.
	Many of the speeches today, including that of the most reverend Primate, focused on debt, but they also demonstrated how hard it is to come up with solutions to all the problems. There are no quick fixes and my speech will not claim that there are.
	My party certainly supports more financial education. Several noble Lords demonstrated the scale of the problem. We believe that lenders have social responsibilities to ensure that they do not make problem borrowing worse than it is. We certainly support the work of credit unions, which are responsible lenders.
	We believe in a proportionate approach to regulation, a point to which the noble Lord, Lord Borrie, referred. We also believe that excessive regulation can have harmful consequences if it drives regulated lending away from the least well off in our society. In particular, my noble friend Lord Griffiths of Fforestfach made some wise comments on that.
	Today's Motion talks about economic inequality. Last month's debate on financial inequality, in which I was unable to take part, covered much of the ground. In that debate my noble friend Lord Marlesford reminded the House of the mathematical meaning of the term "inequality" as simply meaning difference. Inequality is normally used in a value laden way to mean unfairness. That is how we have generally used it today. Let me say straightaway that we on these Benches do not regard poverty as being merely a difference between those who have income or assets and those who do not. It is a proper role of government to tackle poverty both for moral reasons and for the very practical reasons that many have covered today.
	We accept that there will be differences in economic position. We do not agonise, as do some on the Benches opposite and to my right, about income and wealth at the top end of the distribution. Our instincts are not to reach for a wealth tax, a higher rate of income tax or even additional national insurance to eliminate differences caused by high levels of income or wealth. We believe in equality of opportunity, not equality of outcome.
	I support what the right reverend Prelate the Bishop of Newcastle and the noble Lord, Lord Dearing, said about the importance of education because it is one of the things that creates opportunity in our society. We believe in market freedoms and their bed-fellows of incentives and aspirations. People need to have incentives to be different in order to underpin our market economy which provides the economic wealth of the nation. That does not mean that we do not protect the vulnerable—any civilised society does that—but economic prosperity allows us to do it. My party does not have economic levelling-down in its DNA.
	The Motion refers to families and I shall talk about families later. But, like other noble Lords, I cannot let the opportunity of today's debate go by without referring to the 5.3 million poor, largely single, people whom the Prime Minister tried to penalise when he planned the removal of the 10 per cent tax rate. We saw earlier this week a massive climb-down. The noble Lord, Lord Desai, congratulated the Government on this but, as my noble friend Lord Sheikh pointed out, we still do not know whether they will fully compensate all those losing out. The noble Lord, Lord Newby, deconstructed the Government's proposals to date.
	Several noble Lords spoke eloquently on the subject of credit and indebtedness and I shall not compete with that. The Government are themselves big borrowers but their greater failing was to turn a blind eye to rapidly increasing consumer debt. Now we have roughly £1.4 trillion of consumer debt—roughly the same size as the nation's GDP. The Government simply refused to see that debt climbing to nearly 180 per cent of income was potentially unsustainable. That is higher even than the 140 per cent ratio in the US, and look where that economy is headed.
	We have often challenged the Government about rising levels of debt and the plummeting savings ratio, both of which were mentioned by my noble friend Lady O'Cathain. We certainly warned of the personal tragedies that were building up behind those statistics but we also warned of the risks to the economy of growth being fuelled by consumer debt. We were always met with denial.
	"An end to boom and bust" was the extravagant boast of the Prime Minister when he was Chancellor. That now looks ridiculous. Does the Minister think that bragging of that nature now has any resonance with the increasing number of home owners now facing a costly remortgaging exercise or, worse, missed mortgage payments and the threat of repossession? The noble Lord, Lord Best, warned of the problems that will come from rising repossessions.
	We fear for the economy as consumer debt unwinds and hits growth. The Chancellor's Budget predictions of economic growth in the economy are ahead of those of independent forecasters and respected organisations from the International Monetary Fund to the CBI. This is not a debate about macroeconomics but that is the backdrop to today's economic circumstances of families. Household finances are suffering from a combination of high indebtedness and increased taxes and now we have rising inflation, as my noble friend Lord Sheikh related. All the risks are on the downside. Just as we fear for the economy so, too, we fear for household finances.
	Today's debate has rightly focused on poverty and I have made clear our support for tackling it. The Government have sought to reduce poverty among the elderly through a massive expansion of means-tested benefits. Many old people prefer to live with dignity in poverty than subject themselves to means testing and so the take-up figures for pension credit are dreadful, with some below 50 per cent. Using the latest available DWP statistics for pensioners below contemporary average income before housing costs, only 200,000 pensioners have been lifted out of poverty since 1996-97.
	The Government have failed to reduce the number of people living in severe poverty; that is those on 40 per cent or less of median earnings. The Institute for Fiscal Studies calculates that in the past 10 years the numbers have risen by 600,000 to 3.1 million. We support the target of removing child poverty by 2020. The Government have removed significant numbers of children from poverty, but they had a clear target of halving child poverty by 2010, which they are a long way from achieving, as the most reverend Primate pointed out. Child poverty actually rose in the latest set of official statistics. My simple question is whether the Government believe that child poverty will be halved by 2010.
	I expect that several noble Lords received the briefing from Barnardo's, which is an admirable charity with a great commitment to children. It calls for an extra £3 billion from the Government to meet the 2010 target. The most recent Budget showed that the Government did not in fact have any spare resources, but even if they did there are sound reasons for not merely throwing money at poverty. Giving poor families more benefits is not a sustainable solution; it merely masks poverty rather than eliminates it. Work is the most secure route out of poverty. It is not to the UK's credit that we have a higher proportion of children in workless households than the rest of Europe. Sustainable policies need to foster independence rather than dependence, and independence is achieved in the first instance through work.
	The tax credit system has many faults, as the noble Lord, Lord Dearing, outlined, but it can help people back into work. However, a major problem is that it has high withdrawal rates, which create disincentives in particular for those seeking to increase the hours that they work. While the Budget has eliminated the worst marginal withdrawal rates, it has increased by 300,000 people the numbers who have withdrawal rates of 60 per cent or more. It is all too easy to stay hooked on benefits as they are currently constructed. While employment numbers have risen, that masks the fact that there are more than 1.1 million 16 to 24 year-old NEETS—those not in education, employment or training—which is up 14 per cent in the past 10 years. Incapacity benefit claimants now stand at 2.7 million, and they will barely be touched by the latest plans in the Budget for return to work schemes. Those areas have to be pursued if we are to make a significant and sustainable impact on poverty and start to tackle the problem of intergenerational poverty.
	I said earlier that I would talk about the family. I endorse what my noble friend Lord Patten said about the importance of statistics that show the impact of marriage. We now have a new statistics authority, and I hope that it will set aside political correctness and focus on the right statistics to support policy-making in this area. My party, like the noble Lord, Lord Northbourne, strongly believes in families as the best possible unit in which to raise children. We also strongly believe in marriage, and my noble friend Lord Patten gave the economic evidence for that. That is why we plan to recognise marriage in the tax system throughout the marriage and not just at death, which is all that the Government have done.
	There is part of the tax credit system that I am staggered that the Government have not addressed; the couple penalty, which was mentioned by the noble Lord, Lord Anderson. A family can gain by up to £5,000 if the parents live apart rather than together. If nothing else, that has introduced an incentive to fraud, as there appear to be 200,000 more single parents claiming benefits as such than there are single parent households in the country. Benefits that promote at worst family breakdown and at best fraud have no place in a civilised society.
	We have had a wide-ranging debate, with inevitably more problems than solutions. The Government have made some progress, but even the Minister must see that their policies are running out of steam and that money alone cannot solve the problems. We now need policies that tackle root causes, not symptoms. On that basis, we believe that the Government have failed.

Lord Davies of Oldham: My Lords, I am grateful, as is the whole House, to the most reverend Primate the Archbishop of Canterbury for introducing this significant debate, which has focused on one of the most important issues that faces our society, particularly when we recognise that there are difficult times for the economy. We need to address ourselves significantly to the less well-off in our society. The most reverend Primate, in his opening remarks, not only detailed specific areas that needed attention, but put the strongest of moral cases for why our civilised society needs to address the problems of those in poverty. His argument was reinforced by the right reverend Prelate the Bishop of Newcastle, who has again raised regional inequality. We recognise the problems faced by certain regions in Britain, and the north-east is important in those terms.
	Those were the moral imperatives behind the debate that were taken up by many speakers. Noble Lords on all sides sought to emphasise the necessity of meeting that moral commitment. The most reverend Primate raised a number of specific points to which I have a duty to respond, given the importance of his speech in defining this debate. We want to distinguish between the legal alternative credit sector of home credit and payday lending—I was grateful to the noble Lord, Lord Griffiths of Fforestfach, for indicating his interest and for the work that he has done on certain aspects of the legitimate credit sector—and illegal, unregulated loan sharks. There is no doubt that we need to crack down on the latter category, and we intend to do so. We are funding a trading standards project in every region of the United Kingdom to bring prosecutions against loan sharks and provide support for victims, because there is no doubt that this is an abuse to which we need to respond.
	I was grateful to my noble friend Lord Borrie for indicating that under the Consumer Credit Act we now have stronger powers of consumer protection, which enable us to act more effectively to create a fairer and more competitive credit market. The Competition Commission conducted an inquiry into the home credit sector in 2007 and concluded that excessive profit was being made. The commission made recommendations on improved data sharing and better price comparison information for consumers. Those proposals are being implemented. So we are making progress in this area. I do not for a moment underestimate the vulnerability of people to loan sharks and the necessity of forthright action.
	As the most reverend Primate emphasised, there is a debate on the effect of capping interest rates in the world of home credit. There are difficulties in this area. The Government considered the case seriously, but research commissioned by the department has shown that in countries where there are interest-rate caps, there can be negative effects which reduce people's access to credit. All sides of the House recognised that access to credit was important to those in poverty, but it must be on proper terms and in full knowledge of what those terms represent. The Government have therefore decided not to impose an interest-rate cap and will focus on encouraging the provision of affordable credit through credit unions and other third-sector lenders. I might add that the Government's financial inclusion goals are designed to ensure that there is access to appropriate financial services. We want people to be able to manage their money on a day-to-day basis effectively, securely and confidently. We want them to be able to plan for the future and cope with financial pressure and, when difficulties occur, to deal effectively with financial distress.
	I want also within this framework to emphasise the importance of credit unions, an issue introduced by the most reverend Primate. We are taking a view on the difficulties with aspects of credit unions, about which I heard what the noble Lord, Lord Newby, said. I am grateful to those noble Lords who emphasised that the development of credit unions would greatly assist with these present problems. We are considering the whole question of the qualifying criteria for membership of a credit union, the common bond, the ability to pay interest on members' savings and the removal of the prohibition on corporate members. We want to take constructive action that strengthens credit unions. I assure the most reverend Primate and the House that the Government believe that the development of credit unions has an important role to play with regard to these issues.
	The most reverend Primate raised the issue of student loans, as did the noble Baroness, Lady Sharp, and one or two other noble Lords, as being indicative of a changed culture for young people. Young people indeed live in a changed culture. I enjoyed the reminiscences about the days in which some of us grew up. They were different times. I agree with the noble Baroness, Lady O'Cathain, that debt was to be avoided at all costs. It was believed that the shadow of even thinking about buying on the never-never should not darken doors. That also meant that people could become a little wealthier in their old age because they denied themselves when they were younger. However, they never did drive that car, because they had passed the stage at which they could pass the test before they could even purchase the car.
	The modern generation looks differently on these matters and there is no easy or flip way to change that culture, even if that were desirable. I am not at all sure that it is desirable. It is right that individuals should have high expectations from society, although they should recognise that they also have an obligation to that society. Student loans play their part in that. They represent an investment in the person's future, giving the necessary short-term advantages of support so that people can benefit through the development of their education opportunities and then repay society for those benefits. I do not look on student loans as being detrimental in those terms. I think that they fit in well with contemporary culture. They are the clearest possible case of responsible borrowing in order to invest in one's future and then to meet one's obligations to society.
	My noble friend Lord Anderson was a little gloomier than the situation justifies. I do not agree that personal debt is out of control. Debt has been rising in recent times, but personal wealth is higher than ever. Total assets are worth more than £7.5 billion and household net wealth has increased by around 72 per cent in real terms in the past decade. Therefore, people are borrowing against assets. That is not to say that I do not want to respond to the points made in the debate about those who are most vulnerable, but in broad terms I do not accept entirely what my noble friend said. He also asked about the delay in the publication of statistics. I have had that looked into. The month's delay is just a small hiatus; there is nothing sinister to it. I assure him that the statistics will become available shortly.
	The noble Baroness, Lady O'Cathain, asked about financial education and how it fits into the education system. I emphasise that the Government are committed to the necessity of improving the financial capability of students in schools. That means that we need to increase education in financial literacy, and I was grateful to the noble Lord, Lord Dearing, for indicating that some aspects of that could be done through mathematics. We are seeing the use of maths and the development of numeracy in improving the quality of young people's financial literacy, but that does not alter the fact that we need to take on this issue in the wider population. The noble Baroness, Lady O'Cathain, asked whether this was a mandatory or statutory requirement but it is not. We are extremely wary about placing on the teaching profession mandatory, statutory requirements regarding the curriculum, but I emphasise that schools are all too well aware of the need to improve financial literacy and to have programmes showing that the objectives are met.
	The issues raised by the noble Baroness, Lady Sharp of Guildford, somewhat reflected the debate that we had a month or so ago regarding a fairer society and whether our society was becoming grossly less equal and less fair than in the past. We do not believe that to be the case. With regard to the development of the global economy, we certainly recognise that, as the noble Lord, Lord Griffiths, indicated, there is a small percentage at the very top whose very high earnings can stretch the perspective dramatically. However, with regard to the wider society, overall this Government have pursued fair objectives in terms of the rewards and the taxation position. Of course, we will always have problems with those who have difficulty in meeting society's demands. We recognise that some people need help in our society, and that has been reflected in the debate today. However, the Government have significantly concentrated resources in that area over the past decade, and that is why we point to the significant decrease in the level of child poverty since 1997.
	In relation to child poverty, the noble Baroness, Lady Noakes, asked whether I could confirm that we were absolutely on target for 2010. I cannot confirm that but I can confirm that all the work that we have done on child poverty over the past decade compares very sharply with the situation that we inherited. Child poverty tripled in the preceding decade or so under the previous Administration. Therefore, the noble Baroness will forgive me if I am not prepared to accept too many lectures from the Conservative Benches on how to tackle child poverty. We will tackle the issue in the way that we have done successfully over the past decade.
	However, I heard what the noble Lords, Lord Patten and Lord Northbourne, said. No one can deny that, as part of a good society, it is better that children have two parents at home and the advantages of the two-parent family. Every index, as well as our common sense, shows the value of that. However, it is not for the Government to differentiate between the ways in which households are constructed, although it is for the Government to deal with the consequences, particularly for children, when problems occur. That is the basis of our support. I cannot give the noble Lords the statistics that they wanted. I was pressed on this matter on the previous occasion and I have been pressed again today. I cannot differentiate between different kinds of households because that is not our concern; it is not the Government's job to reach moral judgments over who should receive support in those terms. However, it is necessary that we have adequate support for family units in need, which we are concerned to do.
	I bear in mind the strong representations made today which we will continually address. The noble Baroness mentioned individuals with regard to the abolition of the 10p rate. It is important that we address ourselves to people who are in difficulty, including single persons. It was always recognised that the introduction of the 10p rate in 1999 was a significant help to lower earners, but it was never regarded as anything other than a blunt measure because, by definition, reductions in the rate benefit others rather more. Once the tax credit system was in place with its more accurately targeted system for support, of course we would, in due course, seek to get rid of the differential rate.
	I recognise that I am open to challenge on the immediate difficulties of the change to be effected and I would be the last to discount the problems of the past few days. However, I make it clear that the Government intend to recompense those who have lost out through the change. We have not finalised our proposals in that area yet. I have no doubt at all that we will be harassed and harried until we have finalised our proposals, but everyone who is aware of the issue knows that there is no easy flip solution to the matter. The noble Baroness's party in the other place will, like everyone, have to show a degree of patience until we are in a position to recompense those who have effectively lost, which is what we intend to do.
	My noble friend Lord Haskel asked whether tax credits have delivered sufficiently. For families earning less than £10,000, tax credit take-up is 96 per cent. We have problems with tax credit take-up among young, single persons, but let us not exaggerate the position. Tax credit take-up among certain target groups has improved significantly and we are on course to make that the most effective way of redistribution in our society—far more effective than certain aspects of income tax changes.
	I want to express my appreciation for the contribution of my noble friend Lord Watson of Invergowrie to the debate. Like the right reverend Prelate the Bishop of Newcastle, he comes from a different part of the country, able to identify the nature of poverty in society and the real difficulties that communities, one of which he used to represent, face as regards poverty. That is why I emphasise that we are prioritising access to appropriate savings, to insurance and to credit products as part of our financial inclusion strategy. If we are to tackle poverty, it is central to the Government's position that people are able to act effectively on their own behalf, which means that we need to work extensively to improve the understanding and the protections which, in significant cases, they need.
	I have already mentioned my gratitude to the noble Lord, Lord Griffiths of Fforestfach, for his contribution. I was well aware of the work that he did a short while ago on these important issues. We will make the best progress we can. They have informed government insights into the way in which we can make a more effective contribution to the management of debt by those who are not well resourced. I am grateful to him for that.
	The noble Lord, Lord Best, raised the issue of housing and, as ever, he was constructive. The Government are grateful to him for his proposals. He will recognise that he did not cost at least one of those proposals and, as a representative of the Treasury Bench, I winced when he mentioned that second proposal, but I know what he is suggesting. We are facing clear difficulties in the housing market, although the House will recognise the priority that the Chancellor attached to this immediately—the day after the announcement of the increase in financial liquidity. He then met the Council of Mortgage Lenders and others to address these problems. I am grateful to the noble Lord for his proposals. They are not without cost or easy to implement, but no doubt he is right that we will need to look constructively to those strategies that will minimise repossession, which is a terrible cost not only to families and individuals but to wider society.
	My noble friend Lord Desai both entertained the House and produced his usually challenging analysis of what needs to be done. I was going to say that I would take his proposals straight to the Prime Minister, but he is on such good terms with No. 10 this week that he can probably take that message along himself. I shall duly report how constructive my noble friend was in this debate.
	The noble Lord, Lord Newby, commented on credit unions. I have covered that point. I was grateful to him for raising it. No doubt we have to make the creation and development of credit unions much easier than it has been in the past, which is a significant position taken by the Government. I credit the noble Baroness, Lady Noakes, on her opening remarks, in which she expressed some appreciation of the Government's work on poverty in the past 10 years. I accept that her more critical remarks were in the spirit of a constructive debate on how to improve our performance in the next few years and the decades beyond that.

The Archbishop of Canterbury: My Lords, I am grateful for the quality of today's debate, and particularly grateful that noble Lords have of their charity forborne to point out one embarrassingly obvious error in my opening remarks, which I identified when consulting my notes. I referred to the percentage offered by payday lenders—cash down in return for a cheque—as 7 to 8 per cent rather than 70 to 80 per cent. That is a significant difference and I beg your Lordships' pardon for misreading my notes at that point.
	I am also grateful for the elegant New Testament exegesis provided by the noble Lord, Lord Desai, though I should point out that the moneychangers in the temple operated a highly controlled and successful monopoly, which is perhaps not precisely the analogy that many of us in the Chamber would wish to follow. It is not a wholly academic point because, as the noble Lord, Lord Griffiths of Fforestfach, observed in his helpful comments, the problem with many of the existing loan companies is that a pattern of near monopolistic control has developed, which is why it is perfectly correct to discuss this in the context of the Competition Commission. I would be more readily persuaded to abandon all hope of a cap on interest were I a little more confident than I currently am of that competition being assured, but I watch developments with interest.
	A number of points have emerged clearly from several speakers, and I should not like to lose them at the end of this debate. Several of your Lordships have noted the significance of non-economic factors in poverty and the way out of it. Above all, these are family structures and security. The stability of the family as one of the factors that guards against spiralling poverty is something that noble Lords from every kind of conviction and background have reinforced today, and I am very happy to hear that.
	Part of that concern about structured stability also relates to the vital point about savings first raised by the noble Baroness, Lady O'Cathain. Savings, as we have heard from several quarters, represent precisely that kind of planning for security, that kind of fundamental trust in the future, that much of our current climate so conspicuously lacks.
	Two points were not picked up at great length but are material to understanding better the whole context. The first is the point initially raised by the noble Baroness, Lady Greengross, about disability as a factor in poverty. I would hope that that is factored in to all that we say about the peculiar trap that poverty represents for people with long-term illness, occupationally related illness and chronic disability. Not unconnected with that is the point raised by the noble Lord, Lord Haskel, about the security required being a security that should be seen in the levels of public service provision, on which the poor are exceptionally dependent. That certainly relates dramatically to the point raised by the noble Lord, Lord Patten, about rural poverty.
	I have two general observations before I sit down. One has to do with the word inequality, which has been bouncing back between the walls of the Chamber in the last hour or so. I do not think that anyone would wish to oversimplify here. As we have been reminded, inequality can be a descriptive term; it can be an evaluative term. It is important to know in which sense we are using it at any given time. When levels of economic inequality in society reach the stage described by the noble Baroness, Lady Sharp—the point where, for example, we see the migration of portions of the population into gated communities and deeper divisions appearing—the sense of trustful investment by the poorest in the whole of society is weakened. In other words, it is a problem of alienation, not simply of economic disparity. The challenge, therefore, is to restore some level of trust in the structures of society and its economic operations.
	My final observation is a paradox, a paradox to which many noble Lords have referred during today's debate—that those who are most in need of dependable credit in our society seem to find it hardest to obtain it, and that those to whom it is most readily and irresponsibly offered by many agents are those to whom it should not be so readily available. A great deal of what we have been discussing today has essentially focused on how we disentangle the complex processes that have led to such a contradictory situation. I am encouraged by a great deal of what I have heard on all sides today. I am most grateful for the enthusiasm, skill and intelligence that have been expended on this crucial issue by your Lordships during this debate. I beg leave to withdraw the Motion for Papers.

Motion for Papers, by leave, withdrawn.
	House adjourned at 3.03 pm.